Five ways to top up your super, faster

Not everyone looks forward to retiring. Transitioning to the next stage of your life might mean leaving behind the career you worked so hard to build, saying goodbye to colleagues and finding new ways to fill your days.  

It’s also the end of receiving a regular salary or wages. And if you’re not sure whether your super balance is healthy enough to cover your living costs, this can be a cause for concern.  

But no matter how close retirement may be, there are steps you can take to grow your super balance faster, so you can look forward to what comes next.

First things first. You need to have a goal for your retirement savings, so you know what you’re working towards. 

Everyone’s retirement goals are different. Someone who owns their home outright may need less money than someone who is paying off a mortgage or paying rent. And people who want to spend their retirement travelling around the world or enjoying expensive hobbies will need more than someone who is content with a simpler lifestyle. 

The Association of Superannuation Funds of Australia (ASFA) provides some benchmarks that may help you work out your own retirement goal. The benchmarks relate to the retirement savings required to retire at age 67 with either a comfortable or modest retirement lifestyle.^[1] Keep in mind that the benchmark figures are for people who own their home outright. They take into account the Age Pension payments you may receive to supplement your retirement savings.  

Learn more about the differences between a comfortable and modest retirement on the ASFA website.

If you think your retirement savings may fall short of your goal, here are some strategies that can help you build up your super balance. 

1. Make tax-deductible personal contributions 

Putting extra money into your super, on top of the compulsory contributions your employer is making for you, can be a tax-efficient way to boost your balance. If you’re under 67 and meet the eligibility requirements, you can claim the contributions you make during the financial year as a tax deduction.  

Don’t forget to send the notice of intent form to your super fund before you lodge your tax return. 

2. Start salary sacrificing 

With salary sacrificing, your super contribution comes out of your pre-tax salary or wages and is then taxed at a maximum of 15% if your income is less than $250,000. So while you’re boosting your super, you’ll also benefit by lowering your taxable income so you pay less tax.  

Just make sure that your total concessional contributions (employer, personal and salary sacrifice contributions) don’t exceed $30,000 for the year. 

3. Make a downsizer contribution 

If selling your family home is part of your retirement plan, you may want to consider making a downsizer contribution. This type of contribution is only available to people over 55 who have owned their home for at least 10 years.  

With a downsizer contribution, you can contribute up to $300,000 of the proceeds from the sale of your home into your super completely tax-free. That's per person if you’re part of a couple. Check the ATO’s eligibility requirements and follow the process carefully – you may want to get a financial adviser to help you with this. 

4. Reconsider your risk profile 

Some super products automatically invest a greater proportion of your super in conservative investments the closer you get to retirement age.  

Conservative investments, like cash and fixed interest, are referred to as defensive because they have a low risk of short-term loss. But the trade-off is your retirement savings may grow more slowly if you invest a high proportion of your super in these investments.  

On the other hand, there are investments that target higher growth, like shares and property. These investments are far more likely to experience short-term volatility, but they may also help your retirement savings grow faster. 

Most people have a combination of growth and defensive investments in their super. To work out what combination is the best match for your age, retirement goals and risk tolerance, take a look at our risk profiler. 

5. Set up a transition to retirement (TTR) pension  

Once you’ve reached your preservation age, but before you’re ready to give up working completely, you have the option to set up something called a transition to retirement (TTR) pension. It’s intended for people approaching retirement who want to reduce their working hours without stopping completely.  

With a TTR, you receive regular payments from your super that enable you to keep your income at the same level even though you’re working less.   

Another way to use a TTR pension is continuing to work full-time and using the strategy for its tax benefits. If you’re 60 or over, your TTR income stream will be tax-free. And because you’re still working, you can use salary sacrificing and personal contributions to continue boosting your super balance from your pre-tax income. Everyone’s circumstances are different so consider finding an adviser to ensure this is right for you. 

Once you’ve completely retired, you’re eligible to set up an account-based pension. Just like with a TTR pension, you receive regular payments from your retirement savings and your payments are tax-free after you turn 60. But with an account-based pension, you don’t have to pay tax on your investment earnings either, which can help your super savings go further. 

The main benefit of setting up an account-based pension instead of withdrawing your retirement savings as a lump sum is that your money will stay invested, so it will keep generating investment returns. You can choose how often you want to be paid (fortnightly, monthly, quarterly, half-yearly, or annually) and change the payment amount whenever you want as long as it’s above the minimum drawdown rate. 

If you have a TTR, it will automatically switch to an account-based pension when you retire or turn 65 (whichever comes first).  

If you’re uneasy about retirement, contact a financial adviser to help you put comprehensive plans in place now so you can achieve the retirement you want. 

CFS also offers a range of affordable advice solutions. Book a call with one of our guidance consultants to learn more.