Take control of your super
It can be hard to think about your Superannuation and long term financial goals when retirement can seem so long way away. Ask any person approaching 50 and they’ll agree that they should have paid more attention to their Superannuation earlier in life. But, all is not lost. Making a few simple changes now, can make a dramatic difference to your lifestyle when you finally do hit retirement.
Start to get to know your super
It is actually yours! But are you aware of its current balance? Superannuation can be a very complicated topic and for many Australians it will represent the largest asset outside the family home. For this reason alone, it makes sense to get to know what your current balance is, which funds you’re with, and the types of investments that you hold. Consolidating multiple super funds is the easiest way to save on un-necessary fees and its something you can do right now.
Strategies for every stage in life
You don’t need to be a millionaire. Even though starting early will reap the biggest rewards, it’s never too late to build a better future, so if you haven’t paid a lot of attention to it – it’s not too late to start now. Retirement will mean different things to different people. A person in their twenties will have a different strategy to someone in their 40s. But you’d be surprised to see how much difference a little involvement in your Superannuation could make towards your lifestyle when you retire – so the motto is be involved.
So you’re just starting out
You hear it all the time – but although it’s probably one of the things that is further down your priority list, you can relax, just a small additional contribution now could mean a real boost to your Superannuation balance and lifestyle when you do retire.
Make sure you get an understanding of your entitlements too. You may be entitled to further boost your Superannuation through a Government Co-contribution.
With time for compound interest to do the work for you, even small contributions can grow (and grow…that’s the compounding part..!)
Think about taking a little more risk – you have the time and a high-growth investment strategy might be right for you. Whilst this type of strategy may be riskier in the short term, with many years before retirement to ride out market fluctuations, it may prove to be a prudent choice.
At this stage in your life you have started accumulating wealth through investments and may even have a family. It can be hard to juggle all your financial commitments, although paying close attention to your Superannuation now may prove to be a wise decision as retirement is not actually that far away. As time to retirement decreases, it may be worthwhile to review your investment strategy and take a more conservative approach – because you don’t want to risk losing what you’ve already gained.
You might have stopped working, but your Superannuation shouldn’t. It makes sense to leave your money in Superannuation for as long as possible to maximise your retirement benefits. Dependant on age, your Superannuation can start working for you as regular income or in lump sums. With Superannuation changing constantly, it pays to keep up-to-date with what’s going on. The great thing is, at this point you have the time to take a firm interest in any changes that could affect you.
What about Self Managed Super Funds (SMSF)?
Self managed super isn’t for everyone, but it can provide investment options and benefits far out of reach to most funds. Having a good financial adviser means you don’t need to be a genius to make SMSF work for you.
Firstly there is the control – the ability to take control of your own investment decisions is what drives most people towards an SMSF.
Through the control over investment choice, SMSF trustees have the ability to purchase investments that may have been restricted in their existing fund. This may range from direct shares or direct property all the way through to gold bullion or rare collections (which are known to have generated good returns). For business owners an SMSF may even own the business premises and lease these back to the business.
There can be Tax Advantages – An SMSF allows personalised strategies to effectively manage tax. Some strategies include but are not limited to:
- reducing contributions tax to zero,
- reducing tax on investment income to zero, and
- reducing tax on capital gains to zero.
These are not catered for in a retail or industry fund, as the trustee does not keep your personal situation in mind when making its decisions.
Estate Planning – An SMSF has the ability to provide an effective estate planning vehicle which can retain wealth for future generations. An SMSF does not stop when you retire, nor does it necessarily stop upon a member’s death. In fact through the use of prudent trustee structures and investment strategies, an SMSF may continue almost indefinitely over multiple generations.
Personal Insurances – By placing personal insurances such as Life, TPD and Income Protection inside an SMSF, you may be able to free-up personal cash flow for alternative uses. Furthermore, an SMSF may be able to claim a tax deduction for policies that are otherwise not deductible in a personal situation.
What do I need to know before starting?
In order to realise the benefits that come with managing your own Superannuation, you must also accept a level of responsibility. Your Financial Adviser, along with your fund Administrator/Accountant, can guide you through the requirements. This responsibility mainly involves the realisation that:
- You do not have direct access to the money in your Superannuation fund and it must be held within the trust until you can access it on the advice of your Financial Adviser or fund Administrator/Accountant.
- The sole purpose of the Superannuation fund must be to provide for your retirement benefit. Generally, you cannot enjoy a benefit from the investment, and investments must be for commercial purposes.
Want to know more?
Talk to us. The superannuation team at Anne Street Partners have the knowledge to help you with complicated superannuation topics every day. We can guide you along the way and assist you with setting up the right fund or reviewing what you have. We’re here to help.