I had a first appointment with a GP last week. ‘Barry’ was in a bit of a state. He had been reading all these stories in the paper about how much a person needed in super for a comfortable retirement. Too busy focusing on work, fitting in holidays where he could and family commitments, Barry hadn’t been paying much attention to his super. In fact, he wasn’t sure how much he had before he came to see me.
Sadly, I’ve heard the same story many times.
The many reasons
According to the Australian Bureau of Statistics, contractors and business owners have the smallest superannuation balances of any sector. These are the most common answers I get when I ask why:
- I’ve been paying off my home
- I’d prefer to put my money into something I have control over;
- I don’t believe in super.
Rarely do these reasons help you retire in the style you have always dreamed of after years of hard work.
Take control of your retirement funding
Remember, super is just a tax structure, it’s not an investment. You can still control where you put your hard-earned cash. The key is to spread your investments.
Tax treatment is great for high-income earners
You can claim a 100% tax deduction on what you contribute to super, up to $25,000 per annum. Earnings inside super are only taxed at 15% compared to your marginal tax rate of 39%-47%
(including Medicare levy) outside super.
It’s not just for employees
A simple way to start is to set up an automatic debit each month or quarter.
This is what I suggested to Barry
He was 36 and had just $40,000 in super. I suggested he start contributing 9.5% of his salary from now. He paid himself a salary of $180,000pa so that equated to $17,100 a year towards his super.
Based on a net return of 7% pa (a typical ‘Balanced’ fund long-term average), a projection shows that Barry could end up with approximately $1,162,060 at age 65. Once retired, Barry can draw a tax-free income from this balance.
Now Barry’s income and contributions will change over time, enabling him to contribute more which would, of course, give him a better nest egg at retirement.
You’ve worked too hard not to enjoy the best retirement a healthy super balance can buy. The key is to start early.
This article was provided by Damien Winberg from CrownWealth Group. For more information or if you would like to chat with Damien, please contact [email protected]
