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Changes to superannuation in Australia
Ten tips and tricks to make the most of your superannuation
Superannuation Advice
Superannuation Advice can come in many forms. All of which are as valuable as each other in ensuring that you end up as close to your retirement goals as possible. The smallest of change now, with the effects of compounding interest can have a sizeable effect on your retirement income and subsequently your ongoing standard of living.
It is understandable that an event that may be over 40 years away can be placed at the bottom of the ‘to-do’ pile. Though what isn’t realized is that even just a simple additional investment of $100 a year from today can be worth an additional $20,000 at retirement ($100 per year for 40 years – 8% return) and that’s not considering possible taxation savings!
Superannuation advice is simply one small example of how a little bit of planning can drastically change your retirement outcomes. The best thing about superannuation advice is that there are specialized professionals that can take this planning burden on your behalf.
Types of Superannuation Advice
There are two main types of Superannuation advice, product advice and strategy advice. The two types of advice differ depending on your age and retirement goals, so there is no ‘one size fits all’ and any advice given evolves over time with you as your needs and circumstances change. These types of advice can be given separately, but the real value of retirement planning is obtained when your overall superannuation position is assessed and an overall personalized direction is given.
Superannuation advice type 1: Product Advice
The majority of people are invested in default superannuation funds of their employer’s choice without much thought given to how that product will service the specific needs of the individual. Are your needs the same as your colleagues? Do you prefer the same investments as your work colleagues? Are you going to, or do you even want to retire at the same time as your colleagues?
Receiving product advice ensures that you have the most appropriate retirement savings product for your needs and circumstances. This is based on fees, variety and a number of investment choices, insurance options and ease of administration, just to name few. It can also involve consolidating your superannuation if you have multiple superannuation funds accounts.
You don’t simply receive superannuation advice around the product, but receiving product advice will also involve giving you specific investment and fund recommendations based on your tolerance to investment risk and preference to specific types of investments.
Superannuation advice type 2: Strategy Advice
Strategy advice helps to specify a direction to allow you to meet your retirement goals. What if you wanted to retire with an ongoing income of $40,000 every year until you turned 85? Would your 9% employer contributions alone get you there? Most people think that it will, but until they sit down and consider the natural growth of their retirement savings, most find that more than likely they will not have enough to retire comfortably. This is where specific superannuation advice and personal retirement planning advice can get you to your desired outcome.
As mentioned this advice depends on what you want to achieve and at what stage of your life you are at, but it can be broken down into three main categories:
1. Accumulation Strategies (18 – 54 years)- Salary Sacrifice
- Government Co-Contribution
- Spouse Contribution
2. Pre – Retirement Strategies (55 – 65 years)
- Transition to Retirement
3. Retirement Strategies (65 years +)
- Pension / Centrelink Advice
This list is not exhaustive, but by using these tools and more an investor can significantly improve their lifestyle at retirement. How does it work? Well let’s look at 3 possible examples.
Example 1 – Product Advice
- Balance $40,000
- Aged 30 years
- Income $50,000
Impact of a 0.5% fee difference over 36 years – Difference of $105,386 (today’s dollars).
Example 2 – Strategy Advice
- Balance $40,000
- Aged 30 years
- Income $50,000
Making an extra $1000 per annum salary sacrifice contribution over 36 years – Difference of $97,368 (today’s dollars).
Example 3 – Strategy and Product Advice
- Balance $40,000
- Aged 30 years
- Income $50,000
Making an extra $1000 per annum salary sacrifice contribution over 36 years and a 0.5% fee reduction – Difference of $224,176 (today’s dollars).
These are examples only and personal advice is tailored specific to your situation, so the outcome will differ for everybody. However as shown in the graphs above, even the smallest improvement to your retirement planning direction can allow you a better lifestyle at the time when it matters most.
Superannuation advice from xLife’s financial advisers
You’re going to work hard to get to your retirement, let xLife work hard to ensure that your retirement is as comfortable as possible.
Get your first Superannuation Consultation FREE!
Talk to a Specialist Superannuation Adviser on 1300 135 205 about growing your superannuation today!
December 2009
