Super in a volatile environment

What are your options for securing your retirement?
 
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04.Boosting your fund

1 Salary sacrifice

If your employer allows it, making additional contributions from your pre-tax salary is an effective way to boost your super and pay less tax. Be aware that reducing your taxable income through salary sacrificing may also reduce your employer’s contributions to your super fund (usually equivalent to 9% of your base earnings). Try to safeguard these existing contributions before salary sacrificing, by negotiating to maintain your total package value.

2 Free money from the government

Under the co-contribution scheme, people who earn less than $58,980 per year as employees, and who make an after-tax super contribution, can get an additional contribution from the Federal Government. It works on a sliding scale: if you earn less than $28,980, the Federal Government contributes $1.50 for every extra dollar you put in, up to $1500 per year if you contribute $1000 into your super above what your employer pays in. The co-contribution decreases on a sliding scale (it reduces by five cents for every dollar you earn over $28,980) and stops for those earning more than $58,980.

3 Make a contribution on your spouse’s behalf

Tax offsets can be claimed (up to a limit) on super you pay on behalf of your spouse if they have a low income, or no income at all.

4 Make after-tax contributions

They are taxed at lower levels, but there are annual limits for different age groups.

5 Pay lower fees

On average, consumers pay about 1.3% of their super fund balance in fees every year — even when fund managers perform poorly. High fees take a large chunk from your investment returns, so try to pay less. Industry funds often charge lower fees than commercial retail funds, as they don’t pay commissions to financial advisers and are not-for-profit. Pay for financial advice separately when you need it.

6 Review your investment choices

Select a well-diversified mix of assets that reflects your investment timeframe and willingness to accept risk and market volatility. ‘Growth’ assets such as shares are volatile in the short term, but over the long run have given a much better return than safer havens such as cash deposits and fixed-interest funds.

 

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