3 days short of a proper retirement: Don’t let that be you
No matter what side of politics you sit on, the news that Tony Abbott was replaced as Liberal Party Leader mere days shy of a full Prime Ministerial pension is food for thought.
In Australia, we’ve had compulsory super contributions since 1992. However many people, especially women, retire with less than a reasonable level of superannuation. Many of us will retire at 65 or 70 and spend twenty to thirty years living off our superannuation.
Your retirement might seem like decades away, but the money you’re putting aside today can mean the difference between an enjoyable retirement and a retirement filled with dread.
Here are some of the ways to make your retirement work better for you.
Consider topping up super with voluntary contributions
Your superannuation is the silent superhero looking to secure your future. Whether you have an industry or retail superfund or you self manage your superannuation, doesn’t matter. Most of us don’t even think about the regular automatic deductions from our current earnings that end up in our super fund. Many of us hesitate to take advantage of the benefits of increasing that contribution.
Yet topping up your super has many benefits now and in the future:
- If you’re employed by a company as an individual, you can make use of salary sacrificing to potentially lower your tax rate through making voluntary increases to your super contributions. Salary sacrificing can save you money on tax each year while adding to your future retirement funds.
- If you earn just shy of $50K a year, you may be eligible for co-contributions. This means what you contribute as additional funds to your super will be matched by the government. In this circumstance, you receive 50 cents from the government for every $1 you contribute. This is a great way to make your starting salary or part time super contributions provide greater security in the future.
- Any after-tax contribution to your superannuation attracts no additional tax. So as an example, if you earned over $58K and have already paid your income tax on that amount, you can contribute extra money to your superannuation without paying any extra tax on the amount you contribute.
- Self employed people are not forgotten either. Contributing to your super each year means you can claim a tax deduction on your super contributions. This means you can make use of a similar situation as salary sacrifice where you reduce the amount of tax paid on your yearly earnings by being proactive about your financial future. This means actively lowering your tax debt while covering your future plans in the process.
- For self managed superfunds (and super in general) the more you contribute the lower your taxation rate today, and the better your benefit in the long term. And SMSF can be used to assist with other forms of investment in your retirement such as investment and property to help grow that amount further.
If you need advice on how to save money now while putting it towards your future via superannuation, drop us an email now.
Consider looking into a SMSF
Settling for a retail industry super fund for fear of red tape or not having enough funds are common reasons why self employed Australians shy away from SMSF. Another is the alleged volume of work required to manage a SMSF effectively.
Moving from a retail super fund to a self managed superannuation fund may seem an impossible task. However, we’ve helped many solo operators and self-employed partnerships with the right advice and planning to make the SMSF dream a reality.
At Orbit Accounting and Tax, we can assist all kinds of freelancers, small business operators and startup founders to jump aboard the SMSF train. We can help you save towards your SMSF, set it up and help you manage it on a regular basis.
That way, you don’t have to settle for a lower superannuation return at retirement age and can do more of the things you want to do.
Manage your business accounts wisely
Fees, charges, interest, style of bank account – these are not the sorts of things many Australians spend a lot of time pondering. Somewhere along the line, we’ve resigned ourselves to servitude to the business banking system. But it doesn’t have to be that way.
How you manage your payroll, payments and purchases and savings can do a lot to influence the sorts of return you can receive from business accounts and how well you maximise your profits. But knowing how and what influences your standard business accounting is extremely important.
If in doubt, give us a shout. We’re more than happy to work with you to develop saving goals and plans to help you make the most of your business.
Change your mindset
When you are young (or young at heart), full of health and have multiple work opportunities in front of you, retirement seems light years away in the future. But this is the perfect time to train yourself to have good saving habits and start thinking about retirement.
The best time to instil great saving habits and start with super and investment is when you don’t have the high level of debt, mortgage or dependents. Having said that, it’s never too late to set goals and make strong moves towards greater financial security.
Every one of us has the opportunity to turn disposable income into something for our future. A weekly pizza purchase may not seem like much, but it could be the deposit of a future investment property. A daily coffee purchase working for “the man” could become your future business venture. And increased contributions to your super now could mean the difference between retirement with trips to Barcelona – or Budgewoi.
Why days can make a huge difference in your retirement, too
Taking the time to make small financial changes at the earliest point in time can really help change your retirement for the better.
A day spent reviewing your superannuation and current banking practises against your short, medium and long term goals can make a huge difference. By making sure your money is working to the best of its ability, you can minimise your expenditure now and invest for a stronger future return at the same time.
Don’t let future events outside your control rob you of the kind of retirement you want. Make your plans now.