MONEY: building up your super nest egg
ways to build your superannuation before – and also after – you retire.
For many of us retirement is a scary prospect. Having enough money to live on is a big concern. Almost six in 10 Australians don’t think they’ll have enough to retire on and three in 10 think they’ll have “far from enough” according to research from investment advice company MLC conducted last year.
So, despite 25 years of compulsory super, many retirees will have to mainly rely on the Age Pension. At a maximum of $23,598 a year for singles and $35,573 for couples, this is unlikely to pay for all your desires.
The good news is you can improve your super nest egg, even after you’ve retired.
The 2018 Federal Budget included some new measures to help cash-strapped retirees which will take effect from July 1, 2019
(see Super Help for Retirees, right).
For those still working, aim to put away as much as you can afford into super. You can make two types of superannuation contribution: concessional (before tax) up to a maximum of $25,000 a year; and non-concessional (after tax) up to a maximum of $100,000 a year. Once you reach the age of 75, you can no longer make personal (voluntary) super contributions.
Those aged between 65 and 75 have to pass a work test to make contributions, so if your super balance is low it’s worth seeing if you can pick up some work and use the money to boost your balance. You must perform paid work for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which you plan to make a super contribution.
Take advantage of all the rules that could benefit you.
For example, under the co-contribution scheme the federal government will pay you 50 cents for each dollar you contribute to your super fund in after-tax dollars, providing you earn less than $51,813, satisfy a work test and you’re under the age of 71. The maximum co-contribution of $500 on a $1,000 after-tax contribution is payable if your total income is less than $36,813
(in the 2017/2018 tax year).
For those earning less than $37,000 the Australian Tax Office (ATO) pays the Low Income Super Contribution, a refund of contributions tax into an individual’s super account. You can expect a refund of up to $500 a year for the contributions tax deducted from the super contributions.