Are you ready to put a spark in your life with some of the best superannuation strategies going around?
You don’t know what you’ve been missing out on! We’re about to get down and dirty with superannuation strategies that you can implement right now.
Best Superannuation Strategies
There are various superannuation strategies available to you depending on your age and circumstances; including, superannuation investment strategies, end of year strategies, retirement planning strategies, plus much, much more.
Let’s take a look at super strategies by age, as well as super strategies for everyone.
Under 40 Super Strategies
There’s a number of super strategies for people under age 40, such as the First Home Saver Super Scheme (FHSSC) and investment strategies.
When you’re under age 40, superannuation isn’t usually at the forefront of your mind. But here’s a few things that might be relevant to you.
First Home Super Saver Scheme (FHSSC)
The First Home Saver Super Scheme allows you to make voluntary contributions into your superannuation account while you are saving for your first home, so that this amount is invested in the tax-effective superannuation environment, with all investment earnings taxed at a maximum of 15%.
Then, when you are ready to purchase a new home, you can withdraw up to $50,000 of your voluntary contributions tax-free and use this amount towards the purchase of your home.
Read More: First Home Super Saver Scheme
Super Investment Strategy Under 40
If you’re under age 40, you won’t be accessing your super for at least another 20 years. This might entice you to turn up the heat on your chosen investment strategy.
If you hold your super with a reputable super fund that has a range of diversified investment options, you might consider investing in an aggressive investment option, given you have such a long investment timeframe. An aggressive investment option will definitely incur a higher level of risk and will cause your balance to fluctuate more than a rodeo cowboy; but, over the long-term (10 years+) an aggressive investment option will likely provide higher investment returns compared to more conservative options. So, if you can handle the swings, this option might be best for you.
Read More: Superannuation Investment Options
Under 60 Super Strategies
If you’re between ages 40 and 60, you’ve probably built up a respective super balance and want to make the most of it between now and retirement. Apart from the standard end of financial year strategies, super strategies for couples and general super strategies for everyone, you might want to take some time to consider your superannuation investment strategy.
Super Investment Strategy Under 60
Your appetite for risk, as well as how close you are to retirement will help determine how you should invest your super.
If you don’t choose the way you would like your super invested, most super funds will either put you in the default Balanced investment option or invest your balance in an aged-based option. But is this suitable for you?
Everyone is different. If you’re still 10 years from retirement and are comfortable with high levels of volatility, you might consider switching your super balance to a high-growth or aggressive investment option, with the intention of ramping up your savings in anticipation of retirement. Conversely, if you’re risk averse and would like greater protection of what you have built up, you might consider dialling down to a more conservative option.
Keep in mind, that having a high allocation to growth assets, such as shares and property can provide you with higher long-term earnings, but will also incur larger fluctuations in your super balance. A lower allocation to shares and property will give you smoother investment returns but is likely to produce lower long-term returns.
Just make sure you know exactly how your super is being invested and understand investment principles, such as diversification, asset allocation and time horizons.
Read More: Superannuation Investment Options
Over 60 Super Strategies
If you’re aged 60 or over, you should really be focusing on your superannuation, because there are dozens of superannuation strategies available to you – many of which can provide large financial benefits.
Transition to Retirement Pension
A transition to retirement pension allows you to access some of your super even if you are still working. This can be used to pay down debt, supplement reduced working hours or implement a transition to retirement strategy.
Read More: Transition to Retirement Pension
A downsizer contribution allows you to contribute proceeds from the sale of a family home into superannuation, without the amount counting towards standard contribution caps. The result is a higher amount invested in superannuation and a greater income throughout retirement.
Read More: Downsizer Contribution
A recontribution strategy is the process of converting taxable superannuation components into tax-free components in order to reduce potential death benefits tax and protect against possible changes to superannuation and tax rules that could see people over age 60 being taxed on superannuation withdrawals once again.
Read More: Recontribution Strategy
If you’ve met a full superannuation condition of release, such as satisfying the superannuation definition of retirement, or have attained age 65; you are eligible to convert your superannuation balance into an account-based pension.
The benefit of an account-based pension is that you can receive a regular tax-free income to assist in covering living expenses. Also, all investment earnings within an account-based pension are received completely tax-free, compared to being taxed at up to 15% in accumulation phase. This can reduce your tax on super earnings by $600 for every $100,000 of balance every single year, based on an assumed income earnings rate of 4% p.a. Plus, it can eliminate all capital gains tax in super.
Read More: Retirement Income
Maximise Age Pension Income
If you’re nearing Age Pension age, you might consider what can be done to maximise any Age Pension payments or receive other social security entitlements, such as the Commonwealth Seniors Health Care Card.
If you have a younger spouse, you may consider implementing a withdrawal and recontribution strategy – effectively transferring your assessable superannuation savings into their non-assessable super account, resulting in potentially higher Age Pension payments and benefits. This video explains more.
Super Strategies for Couples
If you are a member of a couple, you might consider spouse-splitting super contributions, which allows you to transfer 85% of certain super contributions into your spouse’s account. You might do this to equalise account balances, gain access to super earlier, reduce your total super balance, or ensure more of your balance is not accessible for Centrelink purposes.
The spouse contribution tax offset is another reason why you might consider making a contribution to your husband, wife, spouse or partner’s super account. The spouse contribution tax offset can provide you with a personal tax offset of up to $540 each year.
Super Strategies for Low-Income and Medium-Income Earners
If you are a low-income earner earning below $37,000, the Low-Income Super Tax Offset (LISTO) can boost your super balance by up to $500 simply by receiving contributions into your superannuation account and completing your tax return.
In addition to the LISTO, as a low-medium income earner you might also be eligible to receive the government co-contribution of up to $500 simply by contributing $1,000 to super as a non-concessional contribution, provided you earn less than $58,445.
Read More: Super Co-Contribution
Super Strategies for High-Income Earners
As a high-income earner, your individual tax rate can be as high as 47%. This means all earnings from investments owned in your personal name will be taxed at up to 47%. However, all of your investment earnings within superannuation will only be taxed at a maximum of 15% – regardless of your high-income earning ability.
Therefore, if you have extra savings or surplus income that you will not need until retirement, you may consider increasing your super contributions by making voluntary contributions into super. Specifically, concessional contributions can not only increase the amount of wealth you hold within super, but can also help reduce your personal income tax; while non-concessional contributions allow you to contribute large sums into super of up to $330,000, but do not reduce your personal income tax.
The compounded investment earnings on tax savings by investing inside super instead of outside super can provide you with significantly greater wealth by the time you reach retirement.
Read More: How Much Can I Contribute to Super?
Super Strategies for Everyone
Regardless of your age, marital status, employment status or level of income, there are several super strategies available for everyone; including, consolidating your super, utilising the carry-forward contribution rule, the bring-forward contribution rule or obtaining professional personal financial advice.
If you have more than one superannuation account, you might consider consolidating your super into one account. A benefit of doing so is that fees can be reduced, it can be easier to manage your super, and you can have a more focused investment strategy, to name a few.
There are also risks of rolling over your super.
Read More: Changing Super Funds
Carry-forward super contributions allow you to carry forward unused portions of your concessional contribution cap into future financial years. You can begin carrying-forward unused contributions from the 2018/19 financial year and the unused amount can be carried-forward for up to five financial years.
In order to utilise the carry-forward contribution amount, you need to have had a total super balance of below $500,000 on 30 June of the previous financial year and be eligible to receive concessional contributions into your super fund.
Carry-forward unused concessional contribution amounts can place more of your savings in superannuation and reduce your personal income tax obligations.
The superannuation bring-forward rule allows you to bring-forward an additional two-financial years’ worth of the non-concessional contribution cap, so that you can contribute up to $330,000 at any stage over a three-financial year period without being limited by the annual $110,000 cap.
This can be useful if you recently received an inheritance or sold a large asset in your personal name, such as an investment property, and would like to contribute the proceeds to superannuation.
The bring-forward rule is first triggered in the financial year that your non-concessional contributions exceed the general non-concessional contribution cap of $110,000.
Personal Financial Advice
When it comes to managing your superannuation and retirement plan, personal financial advice from the right person can be highly valuable. You work your whole life to build up your wealth in anticipation of living a comfortable life in retirement. And it’s not something you want to get wrong.
Personal financial advice allows an expert to put you in a better financial position with their knowledge of superannuation rules, tax laws, investment strategies and, ultimately, developing a retirement plan that allows you to live the life you envisaged.
Risking your retirement outcome on a DIY approach can be costly. Don’t risk yours. Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
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