Unexpected news is derailing the retirement plans of Australians: Survey

Australians are not as in control of when we will retire as we may like, with research from Mercer* revealing 40% of Australians were forced into retirement due to redundancy or illness before they were financially ready.

Another 24% retired with insufficient savings.

As a result, most Australians outlive their retirement savings by at least five years, the research found.If you were to retire at age 60 you will need to fund a retirement, on average, of around 25 years based on life expectancy tables produced by the Government.

However, Mercer’s research reveals that if you are a white-collar worker there’s a high chance you’ll live much longer than the average person and have to fund a retirement of around 35 years.

The message here is that you need to take control of your retirement plans as soon as possible, including the need for you to protect your ability to earn an income by purchasing appropriate insurances such as life cover, income protection and trauma insurance.

You also need to build a capital base large enough to fund your lifestyle requirements for your entire retirement.

One strategy to help you to achieve that goal is to optimise your superannuation contributions.

That’s because superannuation is still the most tax effective way to save for retirement.

It’s not the only strategy, however, which is why you should consult regularly with your financial adviser to find out how you are tracking against your retirement savings goals and what, if anything, you need to do to boost or protect your savings.

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How much can you invest in super this financial year?

Here are the superannuation contribution caps which apply for the 2015/16 financial year.

•    Contributions which qualify for a tax deduction

These are known as concessional contributions and the limit is aged based, as shown below. Generally you can only qualify for a tax deduction if you are self-employed.

However employees can benefit as well by making a contribution through salary sacrifice.

The limit includes any Super Guarantee your employer pays on your behalf.

Age                   Tax deductible limit (2015/16)
Up to 49           $30,000
50+                   $35,000

•    Contributions which do not qualify for a tax deduction

You could also invest up to $180,000 p.a. in super as a non-concessional contribution (i.e. you do not receive a tax deduction on this contribution). If you are under age 65, you can ‘bring forward’ up to two years of non-concessional contributions. This means you could contribute $540,000 in one financial year, but you would not be allowed to make non-concessional contributions in the following two financial years.

•    The Government co-contribution

Currently, eligible workers earning up to $50,454 who make personal contributions to super can take advantage of the Government co-contribution of up to $500.

•    Spouse contributions

If your partner’s income is less than $13,800, you could qualify for a tax offset of up to $540 on the first $3,000 you contribute to superannuation for them from your after-tax income. This tax offset decreases as your partner’s income increases above $10,800.

Caution

Disclaimer: This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in July 2015. © Copyright 2015