My Superannuation Balance Vs. My Age
Have you ever wondered how the amount of money you have in your superannuation account compares to other people your age? Below are the statistics for the average super balance for each age group. How do you stack up compared to everyone else?
If you’re above average, well done! However, we’re not finished yet. Now let’s look at the amount of Super you SHOULD have at your age…
As interesting as it is to see how you shape up compared to other people your age, in general, Australians super balances are lagging behind as a whole. As you can see above, there is quite a large difference between the average super for men and women compared to the guidelines of what we should have at various ages.
When taking into account the biggest cost items in retirement – mortgage repayments, rent, home renovations, travel and medical expenses – it quickly becomes apparent that it will require a significant amount of superannuation retirement income to live the lifestyle you want.
According to the Association of Super Funds of Australia (ASFA), the recommended income for a retiree is as follows:
This translates to a final super balance - before commencing the drawing (retirement) phase - of $545,000 for singles or $640,000 combined for couples. If you own your home, to maintain the same standard of living as pre-retirement, a super income stream should be about 70% of your final salary, thanks to the advantageous tax free benefits when making withdrawals. That being said, if you still have a mortgage or rent your home, you will need proportionally more.
What if my balance is below the recommended amount?
If you have just realised that your super balance hasn’t been growing as successfully as you had hoped, don’t worry, there a few ways that can help you catch up.
1. Salary sacrifice contributions: The default amount of super a company is required to contribute to an employees super fund is 9.5% of their salary. You can however add your own earnings – called concessional contributions - to increase this up to a combined maximum of $25,000/year . This alone can increase the amount you will have at retirement drastically while only reducing your income slightly. Any contributions made this way will only incur 15% tax, as oppose to your normal tax rate based on your income. Below shows the difference between the default 9.5% compared to increasing it to 15% over various years based on a $80,000 salary, a current super balance of $50,000 and a 6% return per year.
As you can see, there is a significant difference just by adding in the extra ~$85/week, and you can really see the difference if you have more time left to contribute before retirement.
2. After-tax super contributions: These contributions work similarly to salary sacrifice in that they will significantly increase your super balance over time. However, since they are contributions made post-tax, there is no tax saving compared to pre tax contributions. The maximum amount allowed for contribution per financial year is $100,000.
3. Government contributions: if you earn less than $52,697/ year before tax and make after tax super contributions, you may be eligible for the government to make a co-contribution that will get paid directly into your fund after lodging your tax return.
4. Review your fund: There are numerous super funds available, all with differing fee structures, investment options and insurances. Your super may be impacted by high fees, poorly performing investments or high insurance premiums. Get advice to put in place an investment strategy that aligns with your goals and that is going to ensure your super is working for you in a fund with reasonable costs. Review the insurance premiums coming out of your super to ensure you are only paying for cover that you need. You might find that you are paying too much, or possibly you can afford to pay some of the premiums personally to avoid the impact on your retirement savings. Did you know income protection premiums are tax deductible when paid personally?
Superannuation is one of the best and most important investments a person can have, but unfortunately there are too many people that don’t pay enough attention to it. The earlier you start thinking about it the better off you will be. Small adjustments now can lead to a bigger balance when it comes time to retire. Don’t be afraid to ask for professional help. A qualified professional such as a financial advisor can help direct you on your way to retiring comfortably reducing your financial worries in the later stages of life.
As always If you have any questions or wanted to discuss how we can help you grow your superannuation, we are only one quick phone call or email away. We are mobile and can even come to you for your free initial complimentary consultation - 0423 313 486 or kate@solacewealth.com
Kate Trost
Senior Financial Adviser and Director of Solace Wealth Management (AR numbers 465078/1262350)
Authorised Representative of Avana Financial Solutions (AFSL 516325).
