Are my employer's super contributions going to be enough?
For many of us, our employer's Super Guarantee (SG) contributions will only go so far in retirement.
Depending on your retirement goals and current age, your SG contributions may not be enough to fund your lifestyle in retirement.
How much is enough?
Currently, all employers are contributing 9.25% of their employee's gross income into super.
There are a few ways to work out how much you'll need for the retirement you desire. We take an in-depth look at these different approaches.
How can you better fund your retirement?
If you are retiring, you can:
- Take action so you will qualify for the age pension.
- Use your super in a number of different ways.
- Use your non-super investments.
Let's take a look at these options.
The age pension
Many retirees are relying on the age pension, without first asking 'Can I live on the age pension?'
In most cases, the age pension may not be enough to fund a comfortable retirement on its own. However, it can still play an important role by qualifying you for the pensioner concession card, which saves money on prescriptions, utility bills, council rates and other expenses.
Centrelink applies strict rules around who can get it and how much the benefit will be.
Take action so you qualify
If you won't have enough in super to live a comfortable retirement, you should take these steps to make sure you are on track to qualify for the age pension:
- Understand the eligibility criteria.
- Determine if you currently qualify. If not, find out why.
- Put plans into place to ensure you pass all three eligibility criteria.
Generally, the thresholds and entitlements vary depending on whether applicants have a family home, are single or a couple and if they have invested in a pension or annuity.
The Government can change the limits, thresholds and conditions applying to the age pension..
Using your super
You basically have four options for using your super to fund retirement. These are:
- Leave your money in super
- Income streams - using pensions and annuities
- Lump sum
- Lump sum and income stream
There are tax and pension impacts with each option which are worth investigating.
Using non-super investments
Your assets outside of super are considered part of the assets test, and the income they generate is considered in the Income Test and will form part of your assessable income. Marginal income tax rates will apply to this income.
If you want to convert these assets into super assets, you may need to act before retirement and consider the caps, limits and tax implications.
You may be able to structure your finances before retirement to maximise your pension entitlements and get more from your super. This is where you can benefit from having professional guidance.