Many of us are now bogged down in all the emails and work that comes with January, however, despite the workload in front of you – it’s the perfect time to be considering your financial future. When considering your money and the future, you should always seek professional advice; to get you thinking about what you might need to ask them, we’ve included some handy tips below.
For some of us, retirement is around the corner, for others, it’s not even on the horizon – whoever you are, taking action on your superannuation is something that could and should be done, and it can be done by breaking it down into smaller and achievable actions.
The best and the first place to start is checking out where your super is invested, and getting that allocation right. Think about how much longer you’ll feasibly be working full time and your retirement goals.
Investment – To Each Their Own
If you’re 49 and under then your investments should be fully into growth, through money invested in things like property and shares. If you’re 50 and over then you should definitely be more conservative about your investment allocations, but keep in mind the ability to fund your retirement lifestyle.
Even once you have retired, if your whole super fund is in cash then you won’t generate the income to maximise investments and as a result, your super could deplete much faster than expected. Thus, ensure your asset allocation suits your risk profile.
Save With The Taxman
In mid-2018, legislative changes were introduced and have majorly altered possibilities for further savings but there are many people still unaware of them. One of those changes allows concessional contributions up to $25000 per year, including your boss’s contributions on your behalf, to be made to anyone who wants to.
What this means is, if you’ve got cash to spend, then call up your super fund and make a tax-deductible top-up contribution. Super is tax effective, meaning you save on tax and increase your retirement balance. Many people worry their super balance is following the share markets lower, and are reluctant to make extra contributions in that environment.
It’s good to remember then that when the markets are weak, everything is on sale. If your super is sizeable, the new rules restricting contribution levels and tax-free retirement accounts have made the system super complicated for your average person. So, before making any decisions make sure you understand the changes and your information is correct, meaning you’re not making knee-jerk decisions.
To Downsize or Not?
People over 65 are now able to sell their home and add an extra $300 000 in super. That said, it is difficult to do and that means many people aren’t doing it.
New rules on the assets test mean pensions are cut much faster when asset caps are triggered, so downsizers may find themselves no better off by making the move. It works if you don’t have many assets but you don’t want to be caught in the middle. You may be better off using a reverse mortgage once you’ve utilised all of your super assets. This means you can stay in your house and draw the money whenever you’d like.
Speaking of housing…
The Housing Boom
Another 2018 meant first-home buyers are able to save up to $30,000 for a home deposit through super at the rate of $15,000 per annum.
The scheme allows the diversion of up to $15,000 a year of contributions to build a deposit in the low-tax super environment.
This helps you get extra bang for your buck in saving a deposit, but you have to be very clear on your intent to buy a home, if you change your mind you can’t withdraw the money until you’re 60. So, be sure!