Why You Should Take An Interest In Your Superannuation

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Diverse Children with Various Occupations ConceptYou probably had a goal in life by the time you were six. Whether the goal was to become a fire fighter, a ballerina, a policeman or a sports star doesn’t matter; the key is that you looked into the future and had a clear vision of where you wanted to be as an adult.

So why, once they start a career, do so many Australians stop thinking about a long-term goal and simply fall into the daily grind of working life? And what does this have to do with superannuation?

If you don’t have a retirement goal, it’s impossible to create a plan; and without a clear post-retirement plan, how do you know how much money you will need to save through your superannuation to finance your retirement?

Estimates of how much you need to save for retirement vary widely, from a few hundred thousand to more than a million, but the truth is, you need to save enough before you retire to be able to do the things you want to do after you retire. If your goal is to sit on the veranda and watch the sunset, you certainly won’t need as much as someone who wants to travel the world living in luxurious hotels!

By deciding what you really want to do during your retirement, you can start to put together an estimate of how much money you will need (allowing for price increases over the years). Once you know that, it becomes relatively straightforward to look at your current savings plus your expected super contributions from your employer to see whether you’re on track to achieve your savings goals.

Now what happens if you aren’t on track? You can look at making additional contributions into your superannuation, either through concessional contributions (which are salary sacrificed before tax in deducted) or non-concessional contributions (which are made from income that has already been taxed). Concessional contributions are taxed at a rate of 15% as superannuation income in most cases, while non-concessional contributions are not taxed at all once in your super account, as they have already been taxed beforehand at your marginal tax rate, which could be anything from 0% to 49%.

As well as extra contributions, you should also review your superannuation fund to ensure that you are getting good value for any fees that they may charge. Like any investment, there are a wide range of providers with an even wider range of products, not all of which will suit your needs, so review your options, make sure your contributions are on track, and you just might be able to afford your dream retirement.

By Jennifer Lowe

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