Some recent overseas travel made me realise what a great place Australia is to call home. And we’re not just the lucky country in terms of our high living standards. A recent global survey found we have one of the best superannuation systems in the world – ranking third behind Denmark and the Netherlands.
It seems Australians are pretty happy with our super system too. Research by industry body ASFA found more than half of us support super as a good way of saving for retirement, and 65% of people say they are happy with their fund.
Even better, we’re increasingly keeping track of our super by sticking to just one fund. The number of Australians with multiple super accounts has halved in the last three years, and that’s a good thing.
However, 50% of people don’t know how much super they will need for retirement, and 25% want more information on super. The second issue is easily resolved. There is a wealth of freely available information online, and one of the best places to start is your own super fund or simply check out the MoneySmart website.
The question of how much money we need in retirement is less clear cut. You don’t need a fortune to live well but the nest egg that’s right for you depends on your personal goals.
It pays to think about your plans for retirement, how much your preferred lifestyle will cost, and whether your assets will fund this. Your views on estate planning matter too, especially if you plan to leave a large inheritance.
It’s also worth allowing some flexibility for the inevitable tweaking of our super system. That’s exactly what we’ve seen in recent days with a fresh round of changes to super passed through parliament.
A key change that may affect workers planning to ramp up their super savings late in their working life, is a reduction in the before-tax money you can contribute to super each year. These ‘concessional’ contributions, which include your employer’s compulsory contributions plus salary sacrificed contributions, will be limited to $25,000 annually from 1 July 2017. That’s down from $30,000 at present, or $35,000 if you’re aged over 50.
Your super fund can provide more information on the latest fine-tuning of the super rules, but ongoing changes to super are behind my best tip on saving for retirement – which is to plan early.
It’s often not until we are in our 50s that the reality of a looming retirement sets in, and by then it can be challenging to accumulate significant savings. Aiming to steadily grow a pool of investments, including superannuation, throughout your working life is far more achievable.