Posted on 11/12/2020
If you’re one of the approximately 11.6 million Australian workers now taking home a little extra cash in your pay-packet thanks to the Federal Budget’s recent tax cuts, you might be feeling a little flush for the first time in a while.
In fact, depending on what you earn, the new tax rates could mean you’ll be receiving an extra $40 to $90 a fortnight – an annual saving of at least $1,080.
|Salary||Tax saving per annum||Tax saving per fortnight|
(Source: ATO fortnightly tax table)
We know it’s tempting to use this new-found cash to relax the budget a little, and indulge in a few extra niceties: whether it’s a couple more takeaway coffees a week, that new pair of shoes you’ve been eyeing off, or shouting a round of drinks at the pub on Friday night – but we’d encourage you think more long-term than that.
While we hate to be the fun-police, now is actually the perfect time to get serious about your superannuation, starting by taking a look at how much you have, and how you could use your recent windfall to get ahead.
Here are three simple steps you could take right now to super-size your tax break for better outcomes in retirement.
Step One: Find out how much super you have right now
First, head to your superannuation fund website and login to find out how much super you’ve accrued over your time in the workforce.
It’s a good idea to review your superannuation annually to ensure you’re actively across how much you’ve accrued and whether you could consider contributing more to boost your super.
While you’re there, you might also like to look at the insurance benefits that come with your superannuation fund.
Many people don’t realise that many superannuation accounts come with insurance benefits, the most common of which include:
- Death (including terminal illness);
- Total and Permanent Disablement (TPD); and
- Income Protection Insurance.
If you can’t find any information about how much super you have, or the insurances you may have with your super account online, contact your super fund to learn more.
Step Two: Figure out how much super you should have now, and in the future
While everyone’s journey is different, there is an average amount of superannuation savings that is recommended for each stage of life.
According to the Association of Superannuation Funds of Australia (ASFA) June 2020 report, here’s how much the average Australian has in their super at various ages:
|Age||Men (average)||Women (average)|
If you’re outside of the average – now is the perfect time to start thinking about how you can bump-up your super with the money you’re saving on tax this year.
For many Australian’s on a budget, we know that there’s often very little flexibility to make extra contributions to your super. However, with a little extra now coming in on top of your budgeted income, it’s an ideal time to put that money away in super....
But do you really need to be thinking about retirement now?
According to the ASFAs most recent Retirement Standard data from September 2020, the current estimated yearly income for both a single person and a couple, living both a “modest” and “comfortable” retirement lifestyle, is as follows:
|Modest lifestyle||Comfortable lifestyle|
|Total per year||$27,987||$40,440||$43,901||$62,083|
Step Three: Save it, before you see it!
The best way to save money is to put it away before you see it in your bank account, so you’re not even tempted to spend.
Fortunately, when it comes to superannuation, this is easy, as required contributions are made through your employer’s payroll.
To make extra contributions, just talk to your employer or payroll manager about how you can make personal super contributions.
You could ask them to contribute some of the extra money you’re receiving thanks to recent tax cuts.
By just adding an extra $100 a week to your super now, you could end up with more in your superannuation by retirement – depending on your age, and when you retire.
Ultimately it comes down to short term sacrifice for long term gain. With the extra money in your pocket this year, there’s really no better time to plan for the future – your retired self (who will also like takeaway coffees and shoes) will thank you.
To learn more about up-sizing your super, contact Statewide Super today to speak with one of our financial planners.