Are you close to retirement? Or, are you planning for your retirement? Whatever your circumstances may be, it is always a good idea to know how much money you need in retirement – as this will finance your desired lifestyle when you retire or transition to retirement.
According to the Association of Superannuation Funds of Australia (ASFA), a comfortable lifestyle in retirement usually requires around $545,000 in superannuation savings for singles and $640,000 for couples.
For most people, this is a steep amount and relying on employer contributions may not be enough to have a comfortable lifestyle when in retirement. If you have this concern, here are some ways to boost your superannuation balance:
1. Unused concessional contributions cap
Beginning 1 July 2018, the unused portion of an individual’s $25,000 annual concessional contributions cap can be “carried forward” to later financial years. This is for individuals with a total super balance of less than $500,000 the previous year and have unused concessional contribution cap from 1 July 2018. The first year any person can utilize this is on the financial year 2019-2020. This is handy for when you couldn’t contribute the maximum in a year and wanted to contribute more in the following year/s.
The catch-up amount can be carried forward for a maximum of 5 years.
2. Spouse contribution tax offset
If your spouse is a low-income earner or taking time off work for caring responsibilities, you can help their superannuation grow making super contributions on their behalf. If they earn $37,000 and you contribute $3,000 (after-tax) to their super, you are entitled to the full $540 tax offset on your tax return. This offset diminishes as your spouse earns more than $37,000 and will not be available when they earn $40,000 or more.
3. Government co-contribution
If you earn less than $52,697 per year and make after-tax contributions, you may be eligible for a government co-contribution. The co-contribution is 50 cents for every after-tax dollar you contribute. The government can co-contribute up to $500 when you earn less than $37,697. This decreases as your earnings increase and will be nil when you exceed $52,697.
4. Downsizer contributions
If you are aged 65 or over, a tax-free contribution can be made into your super of up to $300,000 if this amount is from the proceeds from the sale of your main residence (which you should have owned for at least 10 years). This is regardless of your work status, superannuation balance or contributions history. You must make the contribution within 90 days from receipt of the proceeds and that you must not have previously made this type of contribution before.
If you currently do not have a plan to reach your planned superannuation balance, you should make one! Making extra contributions will increase the likelihood of enjoying a comfortable retirement. If you require professional help in this regard, you can contact us on (07) 5451 1118 to discuss your circumstances and needs.