IN YOUR 20S

EX­PERT TIP Jeff Gray, Cbus

Money Magazine Australia - - INVESTING -

1 Con­sol­i­date ac­counts. Each su­per fund you own will charge an ad­min­is­tra­tion fee, so con­sol­i­dat­ing your sav­ings into just one well-di­ver­si­fied ac­count could save thou­sands over your work­ing life. Be­fore you con­sol­i­date, check on ter­mi­na­tion fees, that you re­ceive the same level of insurance and that your em­ployer can con­trib­ute to your cho­sen fund.

2

In­vest­ment op­tions. It is im­por­tant to un­der­stand the dif­fer­ence in longer-term re­sults achieved by growth op­tions ver­sus more con­ser­va­tive op­tions. Af­ter all, you could be talk­ing about an in­vest­ment time frame of around 40 to 45 years of your work­ing life fol­lowed by a po­ten­tial fur­ther 20 to 30 years in re­tire­ment. Time is on your side here and a dif­fer­ence of just 1% or 2% a year in in­vest­ment per­for­mance could amount to an ad­di­tional sev­eral hun­dred thou­sand dol­lars or more over your work­ing life.

3 Gov­ern­ment co-con­tri­bu­tion. For lower in­come earn­ers (less than $51,813pa in 2017-18), the gov­ern­ment will con­trib­ute an ad­di­tional 50¢ for ev­ery $1 of af­ter-tax con­tri­bu­tion you make to your su­per fund, up to a max­i­mum of $500pa.

4

Salary sac­ri­fice. You sim­ply ask your boss (the pay­roll de­part­ment) if you can con­trib­ute some of your pre-tax wage into your su­per ac­count be­fore you pay tax on it. While most peo­ple will in­cur a 15% con­tri­bu­tion tax, that could still rep­re­sent a sav­ing of up to 6%, 19.5%, 24% or 32%, in­clud­ing the Medi­care levy, de­pend­ing on your mar­ginal tax rate.

5

Tax-de­ductible con­tri­bu­tion: From July 1, 2017, ev­ery­one who is el­i­gi­ble to make a su­per con­tri­bu­tion can now claim a tax de­duc­tion for it. This then pro­duces a tax sav­ing that is iden­ti­cal to mak­ing a salary sac­ri­fice con­tri­bu­tion.

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