The new year is a great time to reassess your finances and set new financial goals.
One great way of compounding your super balance is to establish a regular contribution strategy. There are various strategies you can use to contribute to your super, such as voluntary concessional or non-concessional contributions, government contributions, or arranging a salary sacrifice with your employer.
If you thinking of ways to increase your retirement savings and super balance, this article will give you some guidance on how to achieve that.
Super Contribution Tips
Tip 1: Salary Sacrifice Strategy
One of the most common strategies is a salary sacrifice contribution strategy. One of the great benefits of the salary sacrifice method is that you are able to save on tax while simultaneously growing your superannuation balance.
The salary sacrifice strategy involves asking your employer to pay part of your pre-tax income into your super fund. These payments are known as concessional contributions, which are taxed at 15%. As salary sacrifice is paid with pre-tax dollars, the reduction in your take-home pay will be less than the amount you actually contribute into your super.
Increasing your retirement savings while reducing tax, what a great strategy!
However, you cannot contribute more than $27,500 per financial year or else penalties will apply. It’s best to be mindful of this, especially since your salary sacrifice arrangement is not the only contribution that can be included in this concessional contribution cap.
You can discuss contribution cap strategies with a financial adviser, as there are many strategies to take advantage of and to ensure you don’t breach any regulations and end up paying additional fees or taxes.
Tip 2: Claim a Tax Deduction
Sometimes, the salary sacrifice isn’t a viable option. Perhaps, your employer cannot provide you with the salary sacrifice arrangement or you experience irregular income fluctuation throughout the year (common for contractors or self-employed individuals).
In that case, your next best strategy is to claim a tax deduction on your personal super contribution within your tax return. This can be done whether you are an employee or self-employed.
Note: The super contributions you claim as deductions will count towards your concessional contributions cap ($27,500). So you may be unable to engage with this strategy if you have already met your cap.
Tip 3: After-Tax Super Contributions
The payments made to your super from your after-tax pay are known as non-concessional contributions.
You may have additional savings or received an inheritance, that you may consider contributing to your super. This will significantly boost your retirement savings as it will continue to accumulate, tax effectively, in your super fund until you are ready to action your retirement plan.
It’s important to note, that non-concessional contributions are normally capped at $110,000 per financial year, but there are also many more strategies that a Financial Adviser can guide you through which can increase your super by significantly more.
You may want to evaluate your finances to see if you have the means to make a non-concessional contribution or you may want to check if you are close to reaching the cap limit before penalties apply.
Superannuation and Retirement Planning In Adelaide
There are many different retirement strategies and deciding which one is right for you depends on many factors, but it starts with understanding what you have and what you need.
A retirement specialist can guide you through an easy process to ensure you understand various strategies and make informed choices that are right for you.
Professional superannuation advice, from Trusted Advisers can add a lot of value.
If you would rather be retired, than working, let us help you get there sooner,
Book an appointment with us in Adelaide today.
