Are you contributing enough to super?
Build out your nest egg by salary packaging your super
Build out your nest egg by salary packaging your super
Setting yourself up financially for retirement is incredibly important, and your superannuation is a vital part of that process. The question is: are you doing all you need to prepare yourself for your golden retirement years?
If you're not satisfied with where you're currently at, you could make a real difference by salary packaging additional super contributions. It’s one of the simplest items to salary package. And in the long run, it could be one of the most rewarding.
Read on to see if there's more you could be doing to meet your financial goals.
If you’re like many Australians, your superannuation will be a key source of income funding your retirement. With life expectancy high, that money will have to last, as people spend longer in retirement than previous generations.
Life expectancy
Australia has some of the best life expectancy rates of anywhere in the world. Recent ABS research from the period of 2020-22 sets our latest life expectancy at birth as 81.2 for males and 85.3 for females. Because of the potential for such a long retirement, it’s critical to have a strong super balance when you finish working.
A variety of expenses
Of course, once you hit retirement, you’ll have a range of expenses to contend with, both big and small. Some of the larger items could include paying off your mortgage, dealing with renovations on your property, new cars, holiday travel and medical expenses.
Money Smart estimates that you’ll need 67% of your pre-retirement income to maintain the same standard of living once you stop working.
Consider the types of expenses that you expect, and how many of these you think will be big, major costs.
Your current balance
Recently, The Association of Superannuation Funds of Australia (ASFA) provided an update on Australian super balances. Currently, the average super balance for the 35-39 age bracket is just under $91,000. For 40-44, it’s $131,792.
How does your balance look right now… and how does it compare with other people in your age bracket?
It's never too early to keep an eye on your super balance and consider if it's likely to be enough for your retirement years.
It’s impossible to know exactly how much you’ll need once you get to retirement. And the further you are from that day, the more things can change before you get there. But right now, there are a few indicators you can run with (again with the help of ASFA and its research).
First, consider the lifestyle that you’ll want in your retirement. ASFA sets out two main standards of living: comfortable and modest. Both are based on the assumption that you own your own home and that you’re relatively healthy.
A comfortable retirement sets out a good standard of living, with expenses covering daily essentials, leisure and exercise. It also includes going out for the occasional meal and keeping up private health insurance. On the other hand, a modest retirement is geared toward a standard only slightly above the age pension. That means you can expect more basic health insurance and infrequent social, leisure and exercise activities.
Based on a retirement age of 67, ASFA suggests a super balance of $690,000 should cover a comfortable lifestyle for a couple (or $595,000 for a single person). For a modest lifestyle, ASFA notes a balance of $100,000 (whether you’re a couple or a single).
In terms of current expenditure, couples in the age range of 65-84 are spending about $73,000 a year for a comfortable lifestyle. For a more modest living, it sits at about $47,000. Singles are at about $52,000 for comfortable and $33,000 for modest living.
You might also want to consider the impact of inflation, as we see costs continue to increase over time (and periods where the rate of inflation far exceeds prior periods). Meaning you might need even more in your balance by the time you finish working.
Though everyone’s situation is different, the above figures can give you some food for thought when you consider your own circumstances.
Take a look at your current age and super balance and compare that with where you might want to be.
Then consider if you may need to do more to give yourself the most comfortable retirement possible, while leaving as much as you can to the next generation.
You may not be sure whether you're currently on track with your super. Or if your employer's compulsory contributions will add enough to your balance by the time you retire. Whenever you’re uncertain, consider seeking independent financial advice to weigh up your options.
But if you do decide that you want to add to your balance, salary packaging additional super could be the answer you’re looking for.
Simply log into your online account, provide us with some important details (it should take just a few minutes) and you could be adding to your nest egg from your very next pay day.
Not only will you be putting extra money away for retirement, but you’ll also have the added benefit of potentially saving on tax while you do it. That’s because super is deducted from your salary without any income tax.
Instead, there’s just a contribution tax of 15% taken by the super provider on the other end (on contributions up to $30,000 per year, including compulsory employer contributions). Given your income tax rate will generally sit well above 15%, you could expect to make a decent tax saving on each salary packaged contribution.
It doesn't need to be much, either. Small, consistent efforts over a long period of time can add up to a big difference.
Adding even a small amount to your super each pay date could make the world of difference for your senior years.
If you’d like to start salary packaging super, log into your online account to sign up.
DISCLAIMER: Salary packaging is only available to eligible employees of the Queensland Government as per the Standing Offer Arrangement QGP0065-21. The implications of salary packaging for you (including tax savings and impacts on benefits, surcharges, levies and/or other entitlements) will depend on your individual circumstances. The information in this publication has been prepared by Smartsalary Pty Ltd for general information purposes only, without taking into consideration any individual circumstances. Smartsalary Pty Ltd and the Queensland Government recommend that before acting on any information or entering into a salary packaging arrangement and/or a participation agreement with your employer, you should consider your objectives, financial situation and needs, and, take the appropriate legal, financial or other professional advice based upon your own particular circumstances. You should also read the Salary Packaging Participation Agreement and the relevant Queensland Government Salary Packaging Information Booklets and Fact Forms available via the Queensland Government Contracts Directory. The Queensland Government strongly recommends that you obtain independent financial advice prior to entering into, or changing the terms of, a salary packaging arrangement.
This is general information only. Before entering into any salary packaging or novated leasing arrangement, you should consider your objectives, financial situation and needs, and obtain appropriate legal, financial, or other professional advice based upon your own particular circumstances.
Read on for a breakdown on what benefits affect HELP, how they affect it, and how you could turn salary packaging to your advantage.