It’s shocking that many of us are in such deep denial when it comes to our superannuation, but the reality is that two thirds of us do not currently have enough superannuation to retire on. For decades, the message has been that we need to ‘keep on top of it’ - whatever that means as we’re chin deep in the chaos of daily life. There is plenty of guilt to go around - we should have been making voluntary contributions, we should have been contributing since we were 18, now it’s too late and WHAT ARE WE GOING TO DO?
Well, take a deep breathe people because it’s 2019 and the world is a different place now than it was before. For one thing, retirement has become a moveable feast. Those internet entrepreneurs who lived their twenties through the nineties can actually retire right now, but most haven’t, because they don’t want to. Plenty of empty nesters are now living their best lives as property tycoons; and there are plenty of creative ways the rest of us can start contributing to our super now and still live a pretty decent life when we choose to retire.
One of the key reasons people don’t have enough super is because they ‘don’t understand all that stuff’ and in most cases, just leave it to their employer. It is compulsory for Australian employers to pay super under specific conditions. As soon as you become employed - assuming you hand over your Tax File Number – contributions are being made on your behalf. If you’re self-employed then you are your employer and you need a financial advisor to teach you how to make contributions for yourself as your employee. If you’re neither of these then you may still be entitled so check out the full details at www.ato.gov.au/Super/. You can also pay money yourself into your superannuation – like enforced saving for a holiday, but it’s for the long holiday you’ll take when you stop working forever.
1. Check in on your super status
According to Australian Tax Office figures, there is currently $17.5 billion in lost and unclaimed superannuation, just sitting around gathering dust in Australia right now. You can check if you have any by following these instructions, claim yours if you have some, and then roll all of your superfunds over into your preferred account (i.e. the best performing one). Sounds dull? Well, think about it in terms of small victories - if you currently have $42,000 in superannuation and you uncover two more funds with a few thousand each in them from jobs you had when you were younger, you may have cracked the $50,000 balance just by filling out some online forms. Or there might even be more if you’ve been really careless!
Once you’ve done that you should also check with your employer what contributions they are making on your behalf (because you might not know, or because it might have changed) and find out what the balance of that superfund is, if you don’t know it already. Speak with someone in salaries about what your options are with regard to salary sacrificing and what kind of advantages there might be for you if you do that with your super, and possibly other items in your budget as well. Just going through these steps and checking in on your super could grow your balance by thousands of dollars overnight!
2. Make a new plan
Now that you know the numbers, you are better placed to draft a realistic plan for when you will retire and what you will do. This will help you work out how much money you will need annually to live on and what your property needs in retirement may be. If you plan to live your final days out on cruise ships then you really just need a storage container for the family heirlooms right! But if you plan to host every family event for the now dozens of children and grandchildren then you’ll really need a whole house.
Now that you’ve rolled everything into one account, you know your new superannuation balance, and are across what monthly contributions are currently being made, you can start to make a new plan to grow your super over the remaining working time you have before retirement. This might be as small as reducing interest charges or fees, or as large as setting up salary sacrificing or increasing the portion you are contributing. ‘Making a new plan’ refers to specific life choices that can also boost your super by default. You can make your own contributions that will increase your balance, personally or via salary sacrificing, plus give you tax advantages, and you can cash in on government incentives such as the First Home Super Saver Scheme, the Downsizing into Super incentive and free money – where the government matches your contributions out of their pocket. Even just changing the fund that your super is invested in can make a difference; by switching to one that is more in line with your values, or simply has a better return than your current fund. In researching super funds you might decide to buck the trend and set up a self-managed super fund, which also has its benefits. Once you’ve been through those options, you may uncover a few more thousand over the lifetime of your super fund, or in fact discovered you can boost your super simply through making strategic property ownership choices.
3. Downsizing your home and boosting your super
This option may have surfaced while you were considering you plan, however it’s worth exploring in detail because, for many people approaching retirement, it may end up being an ideal solution. Especially because many retirees today are finding the financial plan they had for themselves at the start of their career, is wildly insufficient for the kind of expense and lifestyle costs they now have, not to mention any setbacks they may have incurred as a result of the GFC. The recently launched ‘Downsizing contributions into superannuation’ incentive takes care of your housing needs and your superannuation at the same time. In basic terms, homeowners over 65 can maximise their superannuation, by putting up to $300,000 from the sale of their home into their super fund (or $600,000 per couple). It’s the Government’s way of encouraging people living in large family homes to downsize, further reducing their costs and it offers a tax advantage, with a potential $600,000 being allocated as an investment into superannuation, rather than personal income (which is of course taxable).
4. First Home Super Saver Scheme (FHSSS)
This of course is not relevant to all of us, but First Home Buyers don’t get to downsize their family home if they never owned one, so this one is for them. As mentioned previously, the ATO’s FHSSS gives first home buyers the chance to save for a deposit faster by making contributions to their superannuation. In effect, they are saving for their deposit inside their superannuation account. The FHSSS allows for voluntary contributions over $15,000 and up to $30,000 annually, via salary sacrificing. Those contributions could be made as of July 1st 2018 and withdrawals cannot be made until after July 1st 2019. These contributions would be made in addition to current superannuation salary sacrificing payments, however, so you need to do some serious budget tightening to make it work, and speak to your financial advisor about what the tax benefits would be for you.
5. Side hustle
Who could have predicted the sharing economy a decade ago? It’s like the age of the lemonade stand has returned, but now it’s got a cool haircut and it’s for grownups. If you’ve crunched all the numbers and just can’t pull enough extra cash out of today to pay for tomorrow, then maybe a side hustle is your answer. Universities and TAFEs are always keen for new intellectual talents, so the academics amongst us can source some great teaching gigs and channel that cash straight into personal superannuation contributions. Same goes for any other professional skill or experience; if you have it, someone else will need it and professional consultants are in greater demand these days, for everything from marketing advice or human psychology to sustainable design.
Websites like Airtasker are boosting extra income for those who can do things from home in their spare time, or you could work when you want using resources you already have, by driving for Uber or Shebah. You could also go commercial and set up a low maintenance business such as a laundromat, or get yourself into vending machines. These may seem like strange suggestions but a few hundred dollars extra a week right now could buy you an earlier retirement, plus a bigger nestegg.