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Steps to Secure Your Superannuation for a Comfortable Retirement
With many Australians facing the prospect of a financial struggle in retirement, it’s crucial to take proactive steps towards securing a robust superannuation balance. Recent findings from Finder indicate that approximately 20% of Australians, amounting to 4.3 million individuals, believe their superannuation will not be sufficient to realise their retirement dreams. Furthermore, another 20% assert that they will need to significantly reduce their current expenditure to make ends meet in later life.
Assessing Your Current Financial Standing
Superannuation accounts can vary greatly in terms of investment performance, which can significantly impact the amount you’ll have saved for retirement. Ben Nash, a financial expert, encourages individuals to start with a health check of their current superannuation fund. He advises ensuring that your fund comprises well-performing investments.
“Make sure your super is in a good fund with excellent investment options," Nash states. "You want your money to be working for you, not just for the super fund provider.”
Many individuals may be surprised to discover that more affordable and better-performing super funds are available. It’s not always necessary to opt for a self-managed super fund (SMSF) to achieve solid returns.
To gain a clearer picture of your financial situation, it’s advisable to log into your super account, where you can evaluate where your money is currently invested. Some funds even provide access to financial advisors, who can help tailor your superannuation strategy according to your age and risk tolerance.
Tools like the myGov platform also allow you to compare your super fund against others, providing insight into its performance and potential returns.
Consider Making Extra Contributions
If you are concerned about having a low super balance, Nash suggests making additional contributions when possible. For example, if you have $60,000 in your super and you contribute just $10 a week, over 20 years, you would have added $10,400 to your account. With compound interest, this could yield a total of approximately $319,091 at a 9% rate of return with monthly compounding.
Consulting a financial advisor can help determine if making extra contributions to your super is a sound choice based on your personal financial circumstances.
Understanding Retirement Income Needs
Different aspects of retirement living require differing levels of financial preparation. The Association of Superannuation Funds of Australia (ASFA) provides guidance recommending that singles require about $595,000 and couples about $690,000 to secure a comfortable retirement. The ASFA estimates vary depending on lifestyle:
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For a modest lifestyle:
- Singles: $33,386 annually
- Couples: $48,184 annually
- For a comfortable lifestyle:
- Singles: $52,383 annually
- Couples: $73,875 annually
Data from the Australian Taxation Office (ATO) reveals that the average superannuation balance is just $172,835. The median, which offers an accurate representation by excluding extreme values, stands at $60,037.
The Importance of Proactive Financial Management
Pascale Helyar-Moray, Finder’s superannuation literacy expert, highlights the urgency of ensuring your superannuation is adequately funded while still in the workforce. “A significant number of individuals are anxious about their retirement funds being insufficient,” she warns, noting that relying solely on the Age Pension isn’t a safe bet due to asset limits that might exclude eligibility.
Contributions to superannuation, such as salary sacrifices, can potentially grow your savings while reducing your income tax. Remember, these super contributions are inaccessible until retirement, so consistent contributions, even small amounts like $100 a month, can make a substantial difference over time.
In conclusion, navigating your superannuation isn’t merely about saving a lump sum; it’s about strategically planning to secure a stable financial future in retirement. Seek advice where necessary and consider making small yet significant contributions to ensure you can enjoy your later years without financial worry.
