How to maximise your superannuation
Plenty of savvy Aussies are pulling up their financial literacy socks and taking responsibility for the future of their hard-earned money. Buying property, investing in the share market, or even dabbling in digital assets might all come to mind. However, many people forget about the investment they’ve been making since their first pay cheque: superannuation.
While it might feel pretty untouchable – especially if you’re decades away from cashing in your super – the decisions you make today can have a big impact on just how much money you’ll have on retirement day.
How super works
It’s easy to forget about superannuation, because the funds come out of your pay before it lands in your pocket. If you’re an employee, your employer is required to contribute 10.5 per cent of your salary into a super fund, through Superannuation Guarantee Contributions. (This percentage rate will continue increasing by 0.5 per cent every year until it reaches 12 per cent from 1 July 2025.) Think of it like a passive pool of savings that ensures we all have a nice little nest egg waiting for us in retirement.
According to the Association of Superannuation Funds of Australia (ASFA), the current savings required to support a comfortable retirement, based on a person retiring at age 67, is $690,000 for a couple and $595,000 for a single person. If your retirement day is years away, chances are you’re going to need a whole lot more due to inflation.
How much super should I already have?
Based on ASFA’s Super Balance Detective tool*, this is the average amount (calculated at the time of writing) that people should have today, according to their age, to support a comfortable retirement.
| Age bracket | Average super amount |
|---|---|
| 22–24 years old | Average of $10,000 |
| 25–29 years old | Average of $34,000 |
| 30–34 years old | Average of $75,000 |
| 35–39 years old | Average of $120,000 |
| 40-44 years old | Average of $178,000 |
| 45-49 years old | Average of $239,000 |
| 50-54 years old | Average of $312,000 |
* Data from ASFA Super Balance Detective tool.
If your fund currently contains the average for your age bracket, then that’s super! You’re on track for a comfy financial future. If you're not quite there, never fear! There is still time for you to catch up and make some small changes today that could equal big returns in the future.
After all, wouldn’t it be even better to retire feeling more than just comfortable, so you could go on cruises, buy that holiday home, or simply spoil your grandchildren (even if you don’t have kids just yet)?
Getting the most out of your super
To ensure you’re more than just getting by in your ‘golden years’, you can actually work on your super today. The first thing to do, is see how many funds you have, and consolidate them to one by carefully researching the type of fund you choose. Then, you can start making voluntary contributions – that is, extra repayments towards your super fund. Even small amounts add up over time and can reduce the tax you pay. Be sure to check if there are contributions caps for your fund to avoid paying extra tax later.
Salary sacrificing (or salary packaging) is when you ask your employer to pay part of your pre-tax pay into your super account, in addition to Super Guarantee Contributions. These concessional contributions are taxed at 15 per cent, which for some people will be lower than their marginal tax rate.
Try our salary sacrifice calculator
Non-concessional contributions are deposits you make into your super from your after-tax pay. You can make up to $110,000 in non-concessional contributions each financial year.
Low- to middle-income earners may be eligible for matching co-contributions from the government. For more information, visit the Australian Taxation Office.
Understanding your super investment options
There are various super investment options; these include conservative, balanced, growth, high growth, socially responsible and single asset.
Most super funds offer a choice between pre-mixed and diversified investment portfolios or build-your-own options to suit people who like to be more hands-on with their money.
Why are there so many super funds?
Most super funds fall into one of the following management categories: retail, industry, public sector, or corporate. Employers often have a preselected superannuation fund, but you’re free to select your own fund.
With so many super products on the shelf, be careful to research the right fund for you and consider these key elements:
Fees
Check out how much it costs to invest your money with your preferred super provider and whether there are switching penalties.
Strategy
Ask yourself what type of investment you want. High growth with an elevated risk, or moderate growth with more stability? Once you understand your risk appetite, it’ll become clearer what type of fund will suit you.
Insurance
Many people don’t realise their super fund often comes with certain coverage, such as income protection and life insurance. By reading the fine print, you can ensure you’re covered and potentially avoid doubling up with other policies.
What is impact investing?
Super with impact means investing with good intentions, which rewards you with more than just financial returns. Many funds today offer socially responsible or ethical investment options that rule out companies heavily involved with industries such as gambling, ammunition or even tobacco.
Impact investments can be made in both emerging and developed markets, such as sustainable agriculture, renewable energy, conservation and microfinance, as well as affordable and accessible services, including housing, healthcare and education.
How you can access your super
According to the current rules, you can withdraw your super for three main reasons: when you turn 65 (even if you haven’t retired), when you reach preservation age and retire, or under the ‘transition to retirement’ rules while you’re still working.
However, in some circumstances, you might be able to access all or part of your super early, even before you reach your preservation age. This might occur:
if you're unable to work, or need to work fewer hours, because of a medical condition
in cases of severe financial hardship, where you can't meet your living expenses and have been receiving eligible government income support payments continuously up to 39 weeks
under compassionate grounds to settle unpaid expenses, which could include medical treatment, modifying your home or vehicle because of a severe disability, funeral expenses or a loan repayment to prevent you from losing your home
if you have been diagnosed with a terminal medical condition.
Under the first home super saver scheme, you may also be able to access your super contributions. This scheme allows you to make voluntary super contributions to your super account to save for your first home, then you can apply to access those extra payments, and their earnings, to buy a property.
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This information is of a general nature only and does not take into account your objectives, financial situation or needs. Before acting on any advice, consider whether it is appropriate for your circumstances, and if necessary, seek professional advice. Please consider the relevant Product Disclosure Statement, Product Guide, Target Market Determination, Insurance Guide and Financial Services Guide before taking any action in relation to your superannuation.
