Retirement can be intimidating, so much so that people often put off planning or investing into it until it’s too late.
But as it usually goes, the best way to get started is to just do it. If you’re starting early, you don’t even have to think too hard about planning yet. But you should start building your retirement fund sooner rather than later.
Superannuation contributions can help you build your retirement fund as soon as you start working and if you start as early as you can afford it, you will be able to benefit from compound interest.
If you want to maximise your super balance, contributions may be the way to do it.
The tricky thing about superannuation, though, is that the rules change every year. You have to stay on top of the latest changes to ensure you’re taking full advantage of this opportunity and also not breaking any rules or regulations.
Here are some of the things you need to know about super contributions.
First, Decide If You Are With the Right Super Fund that Matches Your Values
Before you spend the time and money investing in your super fund, first decide if you want to stay with the super fund you are currently with.
Is it an ethical super fund? Do you want your super fund to be more ethical?
How can you pick a superannuation fund that corresponds with your values and does the best things for our financial future as well? Read more about ethical super funds.
Types of Superannuation Contributions
There are two main types of super contributions: concessional and non-concessional.
Concessional Super Contributions
Concessional contributions are also known as pre-tax contributions; they are taxed at a rate of 15%, which for most people is lower than the marginal tax rate meaning you may pay less tax.
There are three more under the umbrella of concessional contributions:
- Compulsory Super Guarantee: the contributions made by your employer
- Salary sacrifice contributions: money you contribute from your before-tax salary under an arrangement with your boss
- Tax-deductible contributions: Contributions you make that you claim a tax deduction on.
Non-concessional Super Contributions
This contribution simply refers to the funds you transfer from your bank account into your super from your after-tax pay. You cannot claim a tax deduction for this money.
If you think your super balance is looking a little low, these types of contributions can be an effective way to top up your super balance.
People often make non-concessional contributions when they’re already reached their contribution cap on the concessional contribution…
What are Super Contributions Caps?
Now, retirement is about timing and planning. You might want to put huge lump sums into your super, but you can’t. There is a limit to how much you can put in there when you make yearly contributions.
- Annual cap for concessional contributions: $27,500 per financial year.
- Annual cap for non-concessional contributions: $110,000 per financial year.
Ready to Enjoy the Benefits of Superannuation Contributions?
While this may sound complicated, with the help of a financial adviser, you can make informed financial and super contribution decisions.
Novo Wealth is an Adelaide-based firm that provides ethical financial advice and superannuation guidance.
If you are interested in making concrete plans for your retirement, we can help you! Schedule a meeting with us today to learn more about your options – book here.
IMPORTANT; This information is general in nature only. It does not take into account your individual circumstances. We recommend that you seek professional advice before making any investment decision.