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5 Strategies to Boost Your Super Balance Before Retirement

As retirement approaches, ensuring a healthy superannuation balance becomes increasingly important for Australian workers. With the right strategies, you can significantly boost your super and secure a comfortable retirement. This article explores five effective strategies to enhance your super balance before retirement, using insights from Australian sources.

1. Maximise Your Contributions

One of the most straightforward ways to boost your super is by making additional contributions. There are two main types of contributions to consider: concessional (before-tax) and non-concessional (after-tax).

Salary Sacrifice (Concessional Contributions)

Salary sacrificing involves directing a portion of your pre-tax income into your superannuation account. This reduces your taxable income and can result in significant tax savings.

  • Tax Benefits: Concessional contributions are taxed at 15%, which is generally lower than most people’s marginal tax rates.
  • Contribution Caps: The concessional contributions cap is $27,500 per financial year. Exceeding this cap can result in additional tax penalties.

After-Tax Contributions (Non-Concessional Contributions)

Non-concessional contributions are made from your after-tax income. These contributions can be beneficial if you receive a bonus, inheritance, or tax refund.

  • Flexibility: You can make one-off payments or set up regular contributions via direct debit or BPAY.
  • Contribution Caps: The non-concessional contributions cap is $110,000 per financial year. If you’re under 65, you can bring forward up to three years’ worth of contributions, allowing you to contribute up to $330,000 in a single year.

Government Co-Contributions

If you’re a low to middle-income earner, you may be eligible for a government co-contribution. For every dollar you contribute after tax, the government may contribute up to 50 cents, up to a maximum of $500.

  • Eligibility: Your total income must be below $58,445 for the financial year, and you must make at least one non-concessional contribution to your super.

2. Utilise Carry-Forward Concessional Contributions

If you haven’t maximised your concessional contributions in previous years, you can carry forward any unused cap amounts for up to five years. This strategy allows you to make larger contributions in years when you have more disposable income.

  • Eligibility: To use carry-forward contributions, your total super balance must be below $500,000 at the end of the previous financial year.
  • Benefits: This can be particularly useful if you receive a windfall, such as a bonus or inheritance, and want to reduce your taxable income while boosting your super.

3. Consider a Transition to Retirement (TTR) Strategy

For those aged 60 or older and still in the workforce, a Transition to Retirement (TTR) strategy can be an effective way to boost your super without reducing your take-home pay.

How TTR Works

  • Draw a Pension: You can start drawing a pension from your super while continuing to work.
  • Salary Sacrifice: Simultaneously, you can salary sacrifice a portion of your income into your super.
  • Tax Benefits: The income drawn from your super is tax-free, and the contributions made through salary sacrifice are taxed at the concessional rate of 15%.

Benefits

  • Maintain Income: This strategy allows you to maintain your current income level while increasing your super balance.
  • Tax Efficiency: You benefit from the tax advantages of both drawing a pension and making concessional contributions.

4. Downsize Your Home

If you’re 65 or older and looking to boost your super, the downsizer contribution allows you to contribute proceeds from the sale of your home into your super.

How Downsizer Contributions Work

  • Eligibility: You must have owned the home for at least 10 years and meet other eligibility criteria.
  • Contribution Limits: You can contribute up to $300,000 per person ($600,000 per couple) from the sale proceeds into your super.

Benefits

  • No Contribution Caps: Downsizer contributions are not subject to the usual contribution caps.
  • Boost Super Balance: This strategy can significantly increase your super balance, providing more funds for retirement.

5. Consolidate Your Super Accounts

Having multiple super accounts can lead to unnecessary fees and charges, which can erode your super balance over time. Consolidating your super accounts into a single fund can help you save on fees and simplify your super management.

Steps to Consolidate Super

  • Find Your Super: Use the ATO’s online services to find any lost or unclaimed super.
  • Compare Funds: Before consolidating, compare the fees, insurance, and investment options of your current funds to ensure you’re choosing the best one.
  • Transfer Your Super: Once you’ve chosen a fund, you can transfer your super online through the ATO or by contacting your chosen super fund.

Benefits

  • Reduce Fees: Consolidating super accounts can significantly reduce the fees you pay, boosting your overall super balance.
  • Simplify Management: Managing a single super account is easier and more efficient than juggling multiple accounts.

Boosting your super balance before retirement requires careful planning and strategic action. By maximising your contributions, utilising carry-forward options, considering a TTR strategy, downsizing your home, and consolidating your super accounts, you can significantly enhance your retirement savings. Always consider seeking advice from a financial advisor to tailor these strategies to your personal circumstances and ensure you’re making the most of your superannuation opportunities.

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