Musings on Superannuation

saving for retirement
Over the last few months I have been thinking a fair bit about superannuation (super). For any non Australians reading this, superannuation is basically what we call our retirement savings. Maybe it’s a hot topic because it’s tax time and also because we just had a federal election. There are so many articles out there right now about what we should do with our super, hence its something that has been lingering in my mind of late.

One of the common pieces of advice that I have read just about everywhere is to make additional contributions. I think I first started making additional contributions through salary sacrifice around 2005-2006. This was mainly due to my dad forcing me to. I am glad he did, it has really helped boost my super over the years.

My salary was definitely not high back then so I started by contributing $50 per week. A few years later I increased it to $70 per week and it stayed that way till the end of 2013, which is when I changed jobs and I stopped making any additional contributions.

When I started my new job I was intending to start salary sacrificing again. However, I reconsidered because I had a mortgage. I just figured I would rather keep the money and put it towards my mortgage and reduce interest instead.

Now almost 2.5 years later I am thinking about making additional contributions again. I still have a mortgage, that hasn’t changed but I do like the idea of building my retirement savings.

The tax incentives are good. You can make a maximum pre-tax annual contribution of up to $30,000 into your super (including your employers contributions) and get taxed just 15%. That is all well and good but the only disadvantage is that you can’t access the money if you need to as it is locked away until you hit retirement age. Hence despite the tax incentive I will most likely start by contributing small amounts and not dump a huge amount in case I need it later.

I have also been thinking about taking more risks with my super. I have been told that I can get a financial advisor, free of charge with my super fund to give me advise on how I can get higher returns. This is another aspect I need to look into, but I just haven’t had the time to get organised and do it.

Do you have any short term plans for your retirement savings?

Image: sterlingadvice.com.au

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2 thoughts on “Musings on Superannuation

  1. Nice post LWL. Putting money into assets / your net worth is a good choice whichever option you choose. Extra super contributions are good, and the higher tax rate you’re in, the more effective it is to use it. There’s different ways to look at your options. Your income is taxed less if contributed to super, but then the earnings are taxed at 15% too. Your income is taxed more as a wage into your pocket, but the interest you save/’earn’ by contributing more to your mortgage isn’t taxable.

    Like you mentioned, the big reason we don’t like super is how long before you can access it (which for us is many decades), we want to retire early, so super doesn’t help with this. We’ll just be using my Super Guarantee to grow it, and whatever we get at 60/65 will be a bonus. We’ve invested it in our fund’s ‘high growth’ option, as this normally provides the highest returns over the long term.

    Tristan

    Liked by 1 person

    • Hi Tristan,
      There are so many things to consider and it’s never a straightforward decision. Like you we would have to wait 30+ years to access our super too (assuming we can access it at 65). Hence, I am thinking of putting the salary sacrificing on the back burner again for now. I feel it makes more sense to put any extra money towards the mortgage instead. I do plan to revisit this again in a few years time.
      However, I still want to investigate opting into the high growth option for my super. One of these days I will make the time to do that 🙂
      As always thanks so much for the comment!

      Liked by 1 person

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