Getting organised
While retirement may seem a long way off, there are small things you can do today to deliver big benefits tomorrow. To get you thinking, we've put together some great ideas to motivate you, save you money and boost your super.
Why it pays to start saving now
When it comes to planning for long-term goals, like retirement, unfortunately many people put off doing something now. However, if you’re prepared to start investing early, time can be a powerful ally.
This is because year after year, the money you invest has the potential to earn more money. And if you re-invest earnings, you’ll have even more in the future. This is known as compounding and it’s what Albert Einstein called the eighth wonder of the world.
For example, if you invested $50,000 today, earned 7% per annum and re-invested your earnings, in 20 years you’d have around $200,000 (before tax). But, if you waited ten years before making the same investment, in 20 years from now, you’d only have around $100,000.
That’s an extra $100,000, or double the amount, simply by investing ten years earlier.
Superannuation is purpose-built for compounding, because by its very nature you’re unable to access your investment earnings until later in life. This means any earnings are automatically reinvested year after year.
To maximise the results, you may want to gradually increase your contributions now, to capture the compounding effect over time.
A financial adviser will help you by taking you through other strategies where you can make a small change today, to result in a big difference down the track.
Reduce your super fees
How many different superannuation statements did you receive this year? If you ended up with several envelopes piling up at home you may be paying more than your fair share of fees, eating into your retirement savings.
If this sounds like you, you’re not alone. It's estimated that one in two Australians aren’t making the most of their hard-earned retirement savings due to holding multiple super accounts.
According to a CHOICE research report2, multiple super accounts are costing Australians $1 billion a year in wasted fees.
This is because depending on the type of fund your super is held in, you may be paying between $30 and $340 in fees per account2.
Consolidating your super accounts is easy. Simply fill out the Consolidate your super form and we'll do the work for you.
Finding your lost super is simple too. Head to www.ato.gov.au/SUPER and use the super tracker to locate any missing money you may have.
To find out other simple tips to make the most of your money, speak to your adviser or contact us to be put in touch with one.
Use super to save on insurance
If insurance is low on your shopping list, don’t worry you’re not the only one.
Many people give personal insurance a low priority because we don’t think we need it. However, strangely, we insure our cars or our homes without a second thought!
Well the good news is that personal insurance can be very tax effective.
In this strategy we outline how you can make sure you can take care of your loved ones, and make sure that if something does happen to you, their future is secure.
What types of insurance are available through super?
Life and Total and Permanent Disability (TPD) insurance pays a lump sum and goes a long way to looking after those you’d leave behind if you died or were seriously injured. It works by paying out a lump sum in the event of your death or serious injury to help care for your loved ones or pay medical bills.
Income Protection insurance is designed to provide you with a monthly income protection benefit of up to 75% of your earnings in the event you are unable to work due to sickness or injury.
Tax-effective insurance
By having your insurance through your super fund, you’re likely to find your premiums cost less as tax concessions apply.
For example:
- If you're eligible to make salary sacrifice contributions you may be able to purchase insurance through a super fund with pre-tax dollars.
- If you earn less than $61,9201 pa and you make personal after-tax super contributions, you may be eligible to receive a Government co-contribution that can help you cover the cost of insurance.
- If you make super contributions on behalf of a low income spouse, you may be able to claim a tax offset of up to $540 pa that can be put towards insurance premiums for you or your spouse.
- If you earn less than 10% of your income1 from eligible employment (eg you’re self-employed or not employed), you can generally claim your super contributions as a tax deduction – regardless of whether they are used in the fund to purchase investments or insurance.
These tax concessions can make it cheaper to insure through a super fund than outside super, enabling you to save money or take out the right amount of insurance for your needs.
To find out other simple tips to make the most of your money, speak to your adviser or contact us to be put in touch with an MLC adviser.
1 Includes a Medicare levy of 1.5%.
2 The Super Secret Report, CHOICE, November 2006.
3 Source: Dalbar Inc. QAIB 2009. The S&P500 Index returns have been calculated before the deduction of any fees or taxes. QAIB calculates investor returns as the change in assets after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses, and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: Total investor return rate and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for the period.