Since the recent changes in the Superannuation legislation, the financial planners in our Perth office have been working hard to figure out all of the ramifications. While we will have more in later months, we thought we’d share our collective thoughts here now that we have had slightly over a month to see how people are being affected.
Starting 1 July, employers are required to make guaranteed payments of 9.25% into the employee’s super fund. This is a rise of .25% from the previous 9%. This doesn’t seem like a lot of money to many but due to the magic of compounding, even a small amount of money can become a lot of money by retirement age.
For younger workers, retirement is a long way off. In addition, there are a lot of other things competing for spots in the “budget.” Consequently, many younger workers don’t really think about their retirement funds. Instead, they spend their money on more immediate concerns such as the basics for survival. In addition, many choose to spend money enhancing their current lifestyles instead of their future retirement.
We encourage everyone, especially younger workers, to revisit and rethink their thoughts on retirement. Now is an excellent time to take control of your future by making additional, voluntary contributions to your super. Even “small” contributions can make a big difference in your retirement lifestyle.
Another factor that many don’t consider–which we will cover more fully in a future post–is that the Government offers incentive payments under their co-contribution scheme. This can also help grow your super into a great retirement lifestyle.
If, like many people, you have insurance owned via your super, you need to monitor your super to make sure that premiums for the insurance don’t erode your super balance. You may need to “top up” your super for better performance.
There are limits called “caps” on how much you are allowed to contribute to your super each year. Those who exceed these contributions can sometimes be penalised by having to pay additional taxes. It is crucial that you discuss your financial future with someone who is qualified to help you make the right decisions regarding your super.
For more information from a financial planner in our Perth office, call (08) 9472 9766 today.