Make your Retirement Fund Work for you

It is estimated that a typical individual will need approximately $40,000 per year in retirement to live a modest lifestyle, and couples may need about $55,000 per year. In your retirement years you will not be earning the income you need to live comfortably, so saving for retirement is very important. The compulsory requirement to make regular contributions into a superannuation fund is designed to help you save the amount of money needed to retire comfortably. Because of how important the superannuation fund is for your retirement plans, it is important to make an effort to maximize the account’s benefit. Consider the following points carefully.

Maximize Your Contributions
First, you should maximize your contributions in your superannuation fund. Currently most Australians are required to contribute at least 9 per cent of their annual income into this account, but you may contribute more. There are two key benefits associated with investing more money into your superannuation fund. First, your account balance will grow more quickly as you invest more money into the account. While the principal amount of your investments will grow, the effects of compounded interest and dividend reinvestment will further enhance growth. In addition, the contributions and earnings on your account are tax advantaged, so you may pay less in taxes by contributing more. However, keep in mind that there is a maximum limit to the amount that you can contribute without experiencing a financial penalty.

Understand the Rules
You should also take time to learn the superannuation rules in place. For example, you may not have realized that a spouse can make a contribution on behalf of a non-working spouse. In this way, the couple can fully take advantage of the tax benefits associated with the superannuation fund. Another example involves the government co-contribution rule for lower income workers. If you earn less than $46,920 per year, you may qualify to receive up to $500 per year in matching contributions from the government. This may be a relatively small amount of money, but it can add up to a considerable amount of money over time.

Invest Wisely
A superannuation fund provides you with the opportunity to invest your money at your discretion. You can choose to invest in high yield but risky investments, low risk but low yield investments or moderately rated investments. Generally, financial advisors recommend that younger Australians invest their superannuation funds more aggressively and in higher yield investments. As you age, however, you should consider diversifying your assets and gradually moving more of your investments into lower risk funds. It is important to take time to educate yourself about investing fundamentals as well as the different investment options available to you. Because you are the person who ultimately is responsible for the growth of your fund’s value, you want to ensure that you are investing your funds wisely.

If you are like most Australians, you are one of millions who participate in a superannuation fund with minimum regular contributions.

Australian readers interested in self managed super funds should have a look at UBank as they seem to offer the best rates (at time of writing).




Guest post from Cody Rowley

Related Post