You may have just read my article on checking your superannuation and feel like you are way behind. So how to do you increase your super, i hope these 7 ways can help inspire you towards your financial goals.
You can make before-tax contributions on top of your employer’s payments. This is called salary sacrificing which means your employer pays a portion of your salary directly into your super account rather than into your bank account.
Aside from boosting your super balance, there are tax benefits to salary sacrificing too: The salary been sacrificed into your super is at a 15% rate, or 30% if you earn more than $250,000. This can be a considerable difference depending on your marginal tax rate.
Your tax savings will depend on how much you contribute to your super. The following table shows the difference between not salary sacrificing, and the first year of salary sacrificing $50 a week ($2,600 a year) on a salary of $100,000 a year:
As you can see from the table above if you earned $100,000 a year and contributed an extra $50 a week to your super before tax, you’d receive a tax saving of $975 a year. This in turns leaves you $1625 shorter in your take-home pay, from your $2600 sacrifices. So from the $50 you sacrifice, it is only “costing” you $30.
When I discovered this “free” money, I was kicking myself for not starting sooner. Plus more money in my Super earlier means more compounding for my retirement.
Making an after-tax contribution is something you can do at any time and in any amount. It’s where you pay money directly into your super account from your bank.
You would only do this if your employer doesn’t allow salary sacrificing or you have hit your after-tax contributions limited, as you have a $100,000 limit for after-tax contributions.
Make spouse contributions
Another way on how to increase your super is if your partner has taken time out of the workforce or is a low-income earner. You should consider making a super contribution on their behalf.
There is an 18% tax offset for contributions up to $3,000. That translates to a maximum tax rebate of $540.
Take advantage of the low-income superannuation tax offset
If you earn less than $37,000, the government low-income superannuation tax office will be paid into your account. It will equal up to 15% of your pre-tax contributions, so if you can maximise your contributions as much as you can afford, the government will pitch in as well.
Find lost super
Do a quick check at the Australian Taxation Office (ATO) website for lost or unclaimed super.
As we move from different employers, we may start accruing different accounts.
By consolidating your super in a single account you may be able to reduce the annual fees you pay. By reducing fees, you will have more money left to work hard for your retirement. See my Super is a dud article.
- You may be charged exit fees
- Tax implications
- You may lose some features and benefits you currently have, such as insurance cover.
Go big or go home
In the long term, the market will historically keep rising, Superannuation is a long-term investment. Mostly because you can’t access it till you retire.
That is a good thing, as time is on your side. Choose the more aggressive super fund to increase your returns. You can afford small crashes and blimps in the short term, as the market will recover and increase in value again.
In the long run, returns from higher-risk investments such as shares outpace cash and bonds. If you still have 10 years or more until retirement, why not consider an all-equity position? That’s what I do, and I am bullish on this belief.
Do you have a dud!
lastly the most important way on how to increase your super in 2021, is to compare your superannuation. You may be in an underperforming super account, either in performance or high fees. Check out the “Is my superannuation underperforming” article on how to check.