As you probably know, I am a big supporter of making extra repayments to your super fund. For many people, the mandatory 9.5% superannuation guaranteed contributions (SGC) are just not quite enough to provide a desirable standard of living in retirement. This is why we need to take our own initiative to tip a little extra in during our working lives.
Below are the three key reasons making additional contributions can greatly benefit you.
- Compounding investment returns.
Did you know that if you generate an investment return of 7% per annum, you will double your money every 10 years?! That is the power of compounding.
Many people leave their retirement saving until just before they retire. This is too late. You need time on your side to save for your retirement as time gives you compounding investment returns. So it is never too early to start adding a little extra to your super.
- Tax savings.
By making extra contributions to super you can save tax as the funds contributed to super as a concessional contribution are tax at 15% as opposed to your marginal tax rate which can be as high 47% inc. medicare levy. In addition, once inside super, earnings are taxed at a maximum rate of 15% which drops to 0% once you enter pension phase.
- Forced savings.
Many people save to buy something. A new car, a holiday, some fancy clothes. It is very rare that you hear of someone intentionally saving to create a future passive income stream. That is why super is so great because its sole purpose it to provide you an income in retirement.
If you are the kind of person that finds it difficult to save, super is a great tool for you as once the money is contributed to your super you can’t access it until you meet a condition of release (which for most of us is retirement).
If you would like to consider contributing more to your super, please get in touch. I will help you assess whether or not it is appropriate for your situation and ensure you work within the superannuation contribution limits.