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5 Useful Tips on How to Boost Your Retirement Savings

May 24, 2024 | Retirement Planning

Imagine retiring after years of hard work and being able to enjoy a fulfilling retirement. As the years pass, you realise the importance of having a substantial nest egg to sustain your lifestyle and ensure financial security well into your golden years. 

By diligently managing your superannuation and implementing strategies to boost your retirement savings, you can safeguard your future and confidently embrace each day, knowing you have prepared wisely for the journey ahead. 

It’s never too late to boost your retirement savings, and this article presents five tips to enhance your superannuation funds. 

Tip 1: Start Early

Australians are living longer, requiring a larger nest egg to cover lengthier retirements and prevent outliving one’s financial resources.

The Super Guarantee (SG) plays a vital role in increasing retirement savings, reinforcing the need to manage and grow super funds actively over time. 

Starting early may significantly influence the growth of your super savings, so you should grasp the advantages of starting your retirement savings journey as soon as feasible. 

Starting early can allow your money to expand exponentially over time because of the power of compounding. 

Compounding happens when the interest or returns on your investment are reinvested, allowing your savings to snowball and accelerate their growth. The sooner you start, the more time your money has to compound, resulting in a much larger nest egg by the time you retire.

Let’s have an example to illustrate the power of compounding over time.

Imagine two 25-year-old friends, Sarah and Emily, eager to build their retirement savings through superannuation. 

Sarah starts saving at age 25 and stops at 44. She saves $30,000 over 20 years, contributing $1,000 annually for the first ten years and $2,000 annually for the next ten years. With a 6% annual return, Sarah ends up with $160,300 by age 65.

Emily starts saving at age 45 and stops at 64. Like Sarah, she saves $30,000 over 20 years, contributing $1,000 annually for the first ten years and $2,000 annually for the next ten years. With the same 6% annual return, Emily has $49,970 by age 65.

Tip 2: Contribute More Than the Minimum

Contributing more than the mandatory amount to superannuation has significant advantages. You can significantly boost your super savings by making additional voluntary super contributions, either through salary sacrificing or non-concessional (after-tax) contributions.

Salary Sacrifice Super Contributions involves redirecting a portion of your pre-tax salary into your super account. This strategy can be highly effective, as the contributions are taxed at the concessional super contributions rate of 15%, often lower than your marginal tax rate. Reducing your taxable income allows you to pay less tax and enhance your super balance.

Non-Concessional Super Contributions or after-tax super contributions are not subject to the 15% contributions tax, and you may even be eligible for government co-contribution if you’re a low-to-middle income earner and make after-tax contributions. 

Non-concessional contributions, can be particularly useful for those who have maxed out their concessional contributions cap.

You can significantly increase your super account and retirement savings for a more financially secure future by implementing these strategies to increase your super contributions including:

1. Salary sacrifice or making before-tax contributions to your super account

2. Making additional voluntary after-tax contributions or non-concessional contributions to your superannuation

3. Utilising the “bring-forward” rule to contribute up to $360,000 in non-concessional contributions over 3 years from 1 July 2024

4. You can claim a tax deduction for after-tax contributions and personal super contributions. You can visit the ATO website for more information on superannuation-related tax offsets.

5. Finding your lost super and consolidating multiple super accounts to reduce fees and maximise your savings

The benefits of contributing more than the minimum to your super account.

Tip 3: Diversify Your Investments

Diversification is an effective strategy for managing risk and maximising returns in your super investments. Investing across various asset classes, such as shares, property, bonds, and cash, reduces the impact of any single investment or asset class performing poorly.

The key benefits of diversification include:

1. Lowering the overall risk of your portfolio, as different asset classes tend to perform well at different times

2. Providing more stable and consistent returns over the long term, as gains in some assets can offset losses in others

3. Protecting your retirement savings from the volatility of any one particular market or sector

To effectively diversify your super investments, consider the following strategies:

Invest Across Asset Classes: Allocate your super contributions across asset classes, such as Australian and international shares, property, fixed interest, and cash.

Diversify Within Asset Classes: Within each asset class, further diversify by investing in various sectors, industries, and investment styles (e.g., value, growth, income).

Utilise Managed Funds: Consider investing in diversified managed funds, which can provide exposure to a broad range of assets and investment managers in a single investment.

Review and Rebalance: Regularly review your superannuation portfolio and rebalance your asset allocation to maintain your desired risk profile and diversification.

What are the benefits of diversifying my super portfolio?

Tip 4: Review and Adjust Regularly

Periodically reviewing and adjusting your superannuation strategy is crucial to ensure optimal growth and alignment with your financial goals. You can make informed decisions to enhance your super savings over time by assessing performance, fees, and investment options.

Regularly reviewing your superannuation strategy allows you to:

1. Evaluate the performance of your investments each financial year and make necessary adjustments to maximise returns.

2. Monitor fees to ensure they remain competitive and do not erode your savings.

3. Assess your investment options to ensure they align with your risk tolerance and long-term objectives.

You need to ensure optimal growth and performance of your superannuation. Here are steps to help you:

1. Review the investment options available within your super fund and assess their alignment with your goals and risk tolerance.

2. Evaluate your super contribution strategies to determine if they are sufficient to meet your savings targets, and consider making extra contributions through salary sacrifice or voluntary contributions.

3. Monitor the performance of your investments and consider diversifying your portfolio to reduce risk and potentially enhance returns.

4. Regularly review fees associated with your super account to ensure they are competitive and not eating into your savings.

Benefits of Reviewing and Adjusting Super Portfolio Regularly

Tip 5: Seek Professional Advice

A financial adviser can provide good advice and expertise to help you make informed decisions and secure your financial future effectively. 

Seeking superannuation advice from a financial adviser or superannuation expert can offer numerous benefits in optimising your retirement savings strategy: 

Improved Financial Confidence: Professional advice can enhance your confidence in managing your finances and making sound investment decisions.

Tailored Financial Planning: Advisers can create personalised financial plans tailored to your specific goals and circumstances, ensuring a strategic approach to growing your total super balance.

Tax Efficiency: Financial advisers can help position your assets in a tax-effective way of building wealth and saving you significant amounts of money in taxes over time.

Legacy Planning: Advisers can help you preserve a legacy for your loved ones and navigate inheritance tax rules to ensure your wealth is passed on efficiently.

Choosing the right financial adviser or superannuation expert is crucial for optimising your retirement savings strategy and securing a better financial future. Here are some guidelines to follow:

Research and Credentials: Look for advisers with reputable credentials, certifications or experience, indicating their expertise and professionalism.

Fee Structure: Understand the adviser’s fee structure and ensure it aligns with your preferences, whether it’s fee-only, commission-based, or a combination of both.

Compatibility: Choose an adviser with whom you feel comfortable and understand your financial goals and risk tolerance to establish a productive and trusting relationship.

Track Record: Consider the adviser’s track record and experience in helping clients achieve their financial objectives, ensuring they have a proven history of success.

Get Superwise About Your Superannuation with Coastal Advice Group 

Superannuation is vital to your financial future in retirement as an Australian. Whatever stage you are at right now in your career, learning about how you can make the most of your long-term retirement savings plan is always good practice. 

At Coastal Advice Group, we can provide the specialist superannuation advice, expert knowledge and guidance you need to help you make the right financial decisions for your superannuation strategy so you can confidently look forward to your future.  

Call us or book online to secure your first appointment with us today and get started!