What to think about before making additional superannuation payments
Superannuation is a relatively well-protected way to increase your retirement savings. However, while funds are heavily regulated (dependent on current and future legislation), there’s still no guarantee that your super income will retain its current tax concessional treatment in the long term.
What’s more, like all investments, the rate of return of your fund is dependent on the broader economy and markets. That’s why it’s best to view additional contributions to your super as just one potential strategy within a broader long term investment plan.
The real questions you should ask are: ‘How much do I need for a comfortable retirement’? and ‘Should I diversify my investments for retirement (some inside super and some outside)?’
Here’s what you need to know.
How to find out how much money you need in retirement
As we’ve spoken about in our previous blog post, when you’re working out how much money you’ll need for your retirement, it’s important to:
- a) Work out your lifestyle objectives, then
- b) Decide on a strategy to achieve your retirement lifestyle.
During this stage you should also think about whether you’ll be eligible for the age pension once you’ve retired. The eligibility age for receiving the age pension in Australia is on the increase (currently 67 years), and only likely to be increased further.
Other issues to think about are whether or not you plan to retire before the age pension age, whether you’ll be transitioning into retirement, and even if you’re planning to work longer than age 67.
You should also factor in the number of years you may live in retirement (whether that’s 25, 30, or even 40 years).
As you can see there’s a lot to consider, which is why seeing a good financial planner can help take away the guesswork and stress from this task.
Some tips about diversifying your retirement investments
After you’ve defined your goals and determined how much you’ll need for retirement, it’s time to think about your tolerance for investment risk. Part of this is thinking about your time horizon for investing.
For example, if you’re currently many years away from retirement, you can generally consider taking on a higher level of risk (and potential return) as you invest over the long term.
On the other hand, if you don’t have many years to go until your retirement, you might prefer to opt for income-generating securities such as large-cap, blue chip stocks, dividend-paying stocks, high-quality bonds and the like.
Of course, it’s always important to carefully take your personal situation into account. For example if you are close to retiring, but you have a substantial company pension plan waiting, you may be able to afford more risk as it won’t substantially affect your retirement.
Whatever your scenario, we have two top tips to leave you with. Firstly, remember that diversification is key, as it helps to minimise your risk of capital loss to your investment portfolio. Secondly, it’s a great idea to see a good financial adviser. They can provide you with the educational tools and support you need, to give you the peace-of-mind and confidence that you’re on the best path.
Get personalised advice about your superannuation
A complimentary obligation-free chat with a Henderson Matusch financial expert can help you understand whether you’re on the right track with your super – and not paying excessive fees.
To discuss your unique situation, your needs, and the options available for your superannuation, simply call us on (07) 3229 3688 or fill out the simple contact form here.