Boost your superannuation funds at tax time!
You may not be thinking of your superannuation and retirement, but doing the right things early on can make a huge difference later down the track. One of the easiest things you can do each year is to use some of your tax return funds as part of a superannuation contribution.
You probably have plans to spend your tax return money on other things, but by making a superanuation contribution and putting in some extra money into your superannuation fund now can mean much more down the track thanks to compound interest. This is where your superannuation earns 'interest on interest', resulting in a snowball effect. So the sooner you start putting extra money into your super, the better!
Why make extra superannuation fund contributions?
You should make extra superannuation contributions to make sure you live a comfortable lifestyle in retirement and have enough funds to pay for everything.
You will need money to pay for:
- Day-to-day living expenses
- House hold bills
- Increasing medical expenses
- Aged care facilities – nursing home or housing with aged care services
- A long post-retirement holiday
Don't be fooled into believing that the government age pension will be enough to retire on. The base single aged pension only pays $322 per week (from 20 March 2010).
This is barely enough to pay for living expenses, not to mention all the extras.
How much should you contribute to your superannuation fund?
It really depends on your situation, such as your age, gender, income, and how much superannuation you already have, plus a few more factors.
The government ensures your employer puts in 9% of your salary into your superannuation fund account. However recent research by The Association of Superannuation Funds of Australia (2009) has shown that 9% is simply not enough. The Association states that you should ideally be putting in 12-15% of your income into a superannuation fund. This amount should be even more if you have, or plan to take any time off work, such as for maternity leave.
This is an extra 3-5% or more of your income that you should be putting away for retirement.
Even contributing an extra $100 a year now from your tax return money can equate to an extra $20,000 in retirement ($100 per year for 40 years, 8% returns). What is even better is that this figure does not even take into account the government's co-contribution scheme if applicable to you.
Government scheme to boost your superannuation funds
The government co-contribution scheme is where the Australian government contributes an equal amount to your superannuation fund depending on your net income. If you earn $31,920 pa or less in the 2009/10 financial year, for every after tax $1 that you contribute to superannuation the Government will co-contribute $1 up to a maximum of $1,000. This is a sliding scale reduced by 3.333 cents for every dollar of your total income, less business deductions for people earning up to $61,920 pa in the 2009/10 financial year. These figures are indexed annually.
Depending on your net income, this means that you could potentially double your superannuation contributions; instead of contributing $100 per year with the government co-contribution you can contribute a total of $200 per year. Imagine how much your superannuation fund can grow if you take action now?
Start contributing more to your superannuation fund today
If you would like to find out how much extra you need to contribute to your superannuation fund, contact xLife today. We offer superannuation comparisons and superannuation fund advice that can help ensure you live a comfortable lifestyle in retirement.
Get your first Superannuation Consultation FREE!
Talk to a Specialist Superannuation Adviser on 1300 135 205 about growing your superannuation today!
May 2010
