How to grow your super balance
You can grow your super using salary sacrificing, by changing your investments and making extra contributions.
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It's important to make sure you're actively growing your super balance while you're still working, because a higher superannuation balance means you'll be less reliant on the age pension. It may also allow you to retire earlier. Thankfully, there are several different ways to grow your super balance. Not only will you retire with more, but there are also tax benefits to growing your super that you can enjoy while you're still working.
The first step is to make sure you've got your money in a super fund with low fees and strong past performance figures.
Compare superannuation funds
*Past performance data is for the period ending June 2021.
Strategies to grow your superannuation
Here are six strategies for growing your super balance.
Opt for a low-fee, high-performing fund
Superannuation fees eat into your returns, so the more you pay in fees, the less you'll have left when you retire. Each super funds charges different annual admin fees, investment fees and indirect fees. This can make it a difficult and confusing process when you're trying to compare funds. As a general rule, if you're paying over 2% of your super balance in fees each year, this is considered expensive.
While past performance isn't an indicator of future performance, it's wise to look for a super fund with a long history of strong returns. To do this, take a look at the returns over 5- and 10-year periods. The better your fund performs, the higher your super balance will be.
Salary sacrifice into your super
You can elect to contribute a portion of your salary or wages into your super via the process of salary sacrifice. With this process, the money you elect to send into your super is directed from your income before you pay tax on it. This means that the money will be taxed at the concessional super rate of 15% instead of your marginal tax rate, which could be up to 45%. This means you'll be reducing your taxable income in the process. You can learn more about how this process works in our salary sacrificing guide.
Make extra contributions
Your employer is legally obligated to pay you super as part of the compulsory superannuation guarantee. However, you can also make additional contributions to your super at any point in the year. There are limits in place around how much you can contribute. Currently (as of 2019), you can contribute up to $25,000 in concessional contributions (these are pre-tax contributions like what your employer pays and money you contribute via salary sacrifice). You can also contribute another $100,000 a year in non-concessional contributions.
Accept more risk
Generally, the greater the risk, the greater the potential return. If you're comfortable, consider switching your investments to a higher-risk option. Most Australians are in the default super option, which is generally a Balanced or Growth option. Take a look at the High Growth option and see if you're comfortable switching to this, instead.
One of the best ways to get more from your super involves adopting an age-based investment strategy. This includes working out how much risk you can afford to take based on your years to retirement. Age is crucial because if you have longer to wait until your retirement, you'll have more time to recover from a major setback and can comfortably accept more risk.
Start early, make more
Starting to save from an early age can make a huge difference to how much you have when you retire, mainly due to the power of compounding. For example, if someone saved $10,000 a year for 20 years while someone else saved the same amount for 35 years, both earning a return of 6% a year, the 20-year compounding amount would generate $367,856 compared to the 35-year saver which would generate $1,114,348 – more than three times as much.
Combine your superannuation into one fund
If you have worked several jobs, chances are you have contributed to various funds that you may have lost track of. Take time to contact all your super funds and consolidate your superannuation into one fund. This way, you can stop paying multiple sets of super fees. If you have more than one super fund, read our guide on how to consolidate your super.
Pocket Money podcast: The superannuation gender gap and how to grow your super
It’s never too late to grow your super
A little sacrifice that you make today will allow you to live a more comfortable lifestyle when you're no longer working. Even if you're only a few years out from retirement, you'll still benefit from contributing more to your super via salary sacrifice or making extra personal contributions.
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