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Look into the crystal ball …

Blue crystal ball

In 2016 the Australian Government Age Pension brings in a maximum fortnightly payment of around $874 for singles (that’s about $23,000 per year) and $1,317 for couples (about $34,000 per year) – not exactly enough to support a fun retirement. Keep in mind it’s quite possible that the government will further tighten the rules governing eligibility for the pension due to the predicted much larger, older population in Australia in the future. There just might not be enough money to support too many people on the pension.

How much do you need to retire?

According to the Association of Superannuation Funds of Australia Limited (ASFA) Retirement Standard it’s around $43,000 a year after-tax as a single or $59,000 as a couple to maintain a ‘comfortable’ standard of living; for a more ‘modest’ standard of living they suggest around $24,000 for a single or $34,000 for a couple. It’s interesting (and disturbing) to note that in 2011-2012 the average superannuation balances at the time of retirement were in the order of $197,000 for men and only $105,000 for women, making it clear that most recent retirees will have had to rely on the Age Pension to fund their retirement. While women retiring in the future won’t be quite so badly off (as they’ll have been in the workforce for longer while compulsory super contributions have been in effect) financial experts generally agree that Australians are not saving enough to afford a comfortable retirement.

How many years will you need to fund?

In 2010, it was estimated that 92% of women living in Australia live until the age of 65 (compared to 87% of men). Once they’ve reached that milestone, women can expect to live for about another 22 years. Will your nest-egg be large enough to support you through your retirement?

Moneygirl recommends

ASFA Retirement Standard

Read more about the ASFA Retirement Standard on the Association of Superannuation Funds of Australia Limited website – it’ll give you a good idea of the cost of the lifestyle that you have in mind for when you retire.

MoneySmart – Superannuation calculator

The Australian Securities and Investments Commission’s consumer website MoneySmart has a great calculator that projects income for retirement and also allows you to compare different funds and see the impact of fees on your final payout.

Ways to boost your superannuation fund

Here are two easy ways to make a difference to your superannuation.

1) Make a personal contribution and get free money

If you’re prepared to invest some of your own after-tax money into your superannuation the Australian Government might be prepared to chip in under their super co-contribution scheme (rules apply). Simply contact your super fund and make a voluntary personal contribution and you could be eligible for the co-contribution. The Government will then make a contribution to your super depending on how much you earn and how much you’ve invested. You’ll receive this contribution sometime after you’ve submitted your tax return for the financial year just passed (it’ll be paid straight into your active super fund).

Treasure chest

2) Salary sacrifice

While the word sacrifice has rather negative connotations, salary sacrificing is a nifty way to boost your super. In fact, peak super body, the Association of Superannuation Funds in Australia Limited, has said a 15% salary contribution (rather than the current 9.5%) is necessary for most people to accrue enough savings to retire on without financial hardship.

How does it work? Basically, you arrange for your employer to pay some of your pre-tax income into your super. So you’ll reduce your taxable income, and therefore pay less tax. Not only that, it’s a great form of forced saving – you don’t spend what you never see! Have a chat to your HR Manager about how this may impact on your salary. Some employers even offer super schemes where they’ll match the amount you contribute yourself.

Moneygirl recommends

Australian Taxation Office – Super co-contributions

Australian Taxation Office – Salary sacrificing super

The Australian Taxation Office’s website has all the information you’ll need to know about tax and your superannuation.

Find a financial adviser

Check out the Australian Securities and Investments Commission’s website MoneySmart – it has loads of great information about obtaining personal financial advice and finding a qualified financial adviser. Experts often suggest you find an adviser who charges by the hour instead of receiving a commission.

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