Five things you need to know to plan for a ‘super’ retirement in Colac

Posted on 02/11/2018 by Wayne Promnitz in News, Superannuation
Wayne Promnitz
Wayne Promnitz is a Principal within the Self-Managed Superannuation group in Sinclair Wilson's Warrnambool office. Wayne specialises in all aspects of Self-Managed Superannuation Funds (SMSFs).

To many of us, the word, ‘retirement’ means freedom. Freedom from work. From a 9-5 commitment. From working for the man, the woman, the customer, the client.

But if you don’t plan carefully, this dream of post-workplace freedom can be a bit of a nightmare; imagining finishing your working life, only to find you have enough money in your superannuation to support you for five years? And that doesn’t include leaving Colac to see other parts of Australia, let alone the rest of the world.

It’s understandable to think you don’t need to consider retirement until you get ‘old’… but what’s ‘old’ anyway?

And trust us, it’s better if you think about it long before then.

Here’s five ways you can take responsibility for your own truly ‘super’ retirement and lock-in that freedom you’re already dreaming of.

  1. Put your Superannuation in the one place

If I told you I had $200 in an account for you, you would want it.  But there is a disconnect with superannuation – it’s ages until I can get it, and who knows what it will be like then anyway

Find the super from all those jobs you had when you were in your teens and 20’s.  Multiple accounts means multiple fees, and it all adds up (and compounds).  Do this, or make the kids do this for theirs.

Complacency (aka thinking it doesn’t matter) is what leads to long-term erosion of wealth (and there’s five words you never want to hear!)

2 – Know the Super Success Factors

Focus on 3 key factors to super success – long-term investment earnings (after fees and taxes), super contributions and lower tax.  These are the three main reasons that superannuation is the most popular retirement savings vehicle, and therefore accumulates retirement savings faster than non-superannuation vehicles.

You can’t get at your super until retirement, so that means it has a long time to accumulate and compound.

Your employer is required to make contributions of almost 10% of your wage, so it adds up over time – make sure you check your statements each year.  And the lower 15% tax rate on super earnings means it grows quicker than outside investments.

3 – Set a retirement date 

We’re not saying you need to stick to it! But setting a deadline can be a big motivator for getting your retirement plans in order. You have a timeline target, which can help drive your strategies for boosting your super, or for working out whether your retirement date is too early, or not early enough.

Setting a retirement date also helps you work out your savings target for your retirement, and for how many years your money needs to last after you finish working.

Recent articles suggest young people are being very frugal so they can retire early (making smashed avo at home for breakfast, rather than eating out, perhaps).  This is good news; they have a plan.

4 – Make a plan

Speaking of plans – make one! It doesn’t have to be complex. For example:

  • Plan to do nothing. Just turning up for work means that your super grows (see above).
  • Plan to do a little. Monitor your spending, see if you can ask your employer to make some of your wage a super contribution (salary sacrifice).
  • Plan to do a lot. Salary sacrifice, utilise super as an effective tax structure, have a good look at the investments in your super, meet with one of Sinclair Wilson’s planners at our Colac office to make sure you are heading the right way.  Change your investments, change your super fund, consider making contributions (either pre or post tax).

5 – Get your head around the tax benefits

Superannuation is taxed at lower rates to encourage people to lock their money away for retirement. This is the reason it is there – to create an incentive to save for your own retirement and reduce the burden on the Public Purse.

Sinclair Wilson’s financial planners in Colac can help you save tax and increase your retirement savings by knowing your way around super’s tax incentives, such as:

  • When you or your employer make super contributions
  • When your super fund makes money on investments on your behalf
  • When your super fund pays you a pension or a lump sum
  • If you die, and your family inherit your super benefits

Essentially, the key message is that your retirement is your responsibility. Don’t kid yourself that it’s something you can worry about ‘in a few years’. Because as anyone approaching retirement age will tell you, it comes around quicker than you’ll realise.

You can never start this process too early, but you can certainly leave it too late.

Need to start a conversation? The first step is contacting one of our Superannuation experts.