It’s rarely too early – or too late – to make a difference in how you retire. Consider gearing up for your golden years with these ideas.
Whether you’ve just joined the workforce or you’re about to announce your retirement, there are steps you can take to build up your nest egg.
While people in their 20s, 30s, and 40s may be more focused on immediate cost pressures, such as paying off a mortgage, small tweaks earlier in your working life can often make a difference when you hit retirement age. Meanwhile, in your 50s and 60s, the rules allow you to play a bit of catch up if you haven’t put away as much as you need. Here are some starting points.
In your 20s
- Check you’re being paid the right amount of super – If you’re an employee, your employer should be paying you at least 11.5 per cent of your salary each year in super contributions, straight into your chosen fund.
- Look at fees, performance and risk – If you’re overpaying on fees or in a low-performing fund, it can have an impact on your fund balance, so it’s often worth correcting early. Younger people sometimes adopt aggressive or growth strategies because they have the time horizon to recover from market downturns.
In your 30s
- Consider salary sacrifice – Salary sacrifice involves asking your employer to direct some of your pre-tax income into super. It’s a popular strategy because it can reduce your taxable income – and, in effect, how much tax you pay – while also bumping up your retirement savings. Pre-tax contributions are taxed at 15 per cent, which is below most people’s marginal tax rate.
- Check your insurance – Many funds have arrangements to offer life, total and permanent disablement (TPD), and income protection insurance to their members through super. As you move through your working life and your circumstances start to change, it’s worth checking in to see if you have the right level of insurance.
In your 40s
- Think about professional advice – Depending on when you want to retire, you may be only a couple of decades out once you hit your 40s. Consider speaking to your fund or a qualified financial adviser for advice on how your super is stacking up for your retirement goals.
In your 50s
- Consider extra contributions – Each year, you can contribute up to $30,000 in pre-tax income to super (this includes salary sacrifice). If you’re playing catch up, however, you may be able to ‘carry forward’ contribution caps from previous years. It depends on how much you’ve contributed over the past five years, so it’s worth speaking to your fund or an adviser if you’re unsure. You can also contribute up to $120,000 each year after tax.
- Revisit your plan – As you get closer to retirement, consider looking at your plan again to see if you’re still on track and whether you need to pivot your strategy.
In your 60s
- Review your strategy – If you’re still a few years away from leaving work, consider if there’s anything you wish to do to build your retirement savings, including extra contributions, spousal contributions or downsizing.
- Consider how you’ll access super – When you reach your chosen retirement age, you may be able to elect to have your super paid out as a lump sum or a retirement income stream.
Look at your eligibility for government benefits – Once you hit age 67, you may be eligible for benefits including the Age Pension and healthcare concessions. You can check in with Centrelink to find out if these apply to you.