Key strategies for maximizing your superannuation savings before retirement
As you approach retirement age, it’s crucial to take a closer look at your superannuation (super) to ensure you’re on track for the lifestyle you want in your later years. Super is likely to be one of your most significant financial assets, so it’s worth dedicating time and effort to make sure it’s working as hard as it can for you. Here’s what you need to consider:
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1. Assess Your Current Super Balance
First, take stock of where you stand. Many Australians don’t regularly check their super balance, which can lead to surprises later on. According to the Association of Superannuation Funds of Australia (ASFA), the average super balance for those approaching retirement (aged 60-64) was around $393,000 for men and $325,000 for women in 2023. These figures are useful benchmarks, but everyone’s situation is different. Check your balance and consider whether it aligns with the lifestyle you envision in retirement.
Resource: You can check your super balance through your fund’s online portal or by using the myGov website, where you can link your account to the ATO’s online services at their website.
2. Review Your Investment Options
As you near retirement, your investment strategy should reflect your changing risk tolerance. Most super funds offer a range of investment options, from conservative to high growth. A common strategy is to gradually move to more conservative investments as you approach retirement to protect your nest egg from market volatility. However, with people living longer, it’s also important to ensure your super continues to grow during retirement to support you for decades.
Resource: Speak with a financial advisor or use tools provided by your super fund to assess your risk profile and adjust your investment options accordingly.
3. Consider Your Income Needs in Retirement
Think about how much income you’ll need once you retire. ASFA suggests that a single person needs around $49,462 a year for a comfortable retirement, while a couple would need about $69,691. These estimates assume you own your home and are relatively healthy. Use these figures as a starting point but personalise your budget to fit your lifestyle and circumstances.
Resource: The MoneySmart website, run by ASIC, offers a retirement planner calculator that can help you estimate how much super you’ll need to achieve your desired retirement lifestyle. You can access it at their website.
4. Maximise Your Contributions
It’s never too late to boost your super. If you’re under 75, you can make additional contributions, known as ‘concessional’ (before-tax) and ‘non-concessional’ (after-tax) contributions. These contributions not only increase your retirement savings but may also reduce your taxable income if done strategically.
Resource: Consult the ATO’s website for up-to-date information on contribution caps and potential tax benefits at their website.
5. Review Your Super Fund’s Performance and Fees
Ensure your super fund is performing well compared to others in the market. High fees can erode your retirement savings, so it’s essential to choose a fund with competitive fees and a solid track record. Use comparison websites to check how your fund stacks up against others.
Resource: The Australian Government’s YourSuper comparison tool is a helpful resource for comparing super funds based on fees and performance. You can find it at their website.
6. Plan for Withdrawals
Finally, consider how you will withdraw your super. Will you take it as a lump sum, convert it to a pension, or a mix of both? Each option has different tax implications and impacts on your overall retirement strategy.
Resource: Discuss these options with a financial advisor who can help tailor a withdrawal strategy that suits your needs.
Retirement is an exciting phase of life, but it requires careful planning to ensure your super can support the lifestyle you desire. By taking the time to assess and adjust your super strategy now, you can enjoy greater peace of mind in your retirement years.
Now is also the perfect chance to ask How Does Your Super Fund Stack Up? And learn if you should get insurance through your superannuation fund here.
