Australians will need to rebuild their superannuation and retirement savings, after withdrawing more than $36 billion in early super release payments in 2020, according to Colonial First State’s Retirement Realities Series.
The research found that the largest number of early super payments were made to Australians under age 40 with Australians under 30 receiving nearly one-third of these payments.
The research also revealed that Coronavirus had a big impact on the retirement savings of women, with the average super balances for men consistently higher than women – $110,000 vs $93,000 in December 2020, with a faster rate of growth for men.
But there is positive news. Half of Australians who withdrew their super early, have now made headway in making contributions either through their employer or by making their own contributions.
Despite the challenges there are a number of practical ways for Australians to get their super back on track and live a comfortable life in retirement.
Five Tips to Consider to rebuild your Super
- Make small and regular top-ups
Even a small contribution to your super makes a big difference in the long term and to how much money you have in retirement.
How does it work? Your employer can pay some of your salary into your super before tax is taken out, instead of our bank account. And yes, that means a tax benefit. It is also a very simple and effective strategy.
If you withdrew $10,000 from your super, making additional contributions of just $20 per fortnight pre-tax (salary sacrifice) at age 30, can mean an additional $25,000 at retirement.
- Seek advice
Advice can come in different shapes and sizes. Make the most of free online resources and calculators that provide useful tips and information.
A financial adviser can also help you plan for your future. According to Colonial First State, women who received financial advice made a 199% higher average voluntary contribution in 2020 compared with women who did not get advice.
Similarly, the research found that men who sought financial advice were 85% ahead of those who didn’t get advice.
- Manage your debts
The majority of people who accessed their superannuation early used it to pay their mortgage or rent (29%), household bills (27%) or credit card bills or personal debts (15%) . It might be a personal loan, a credit card or a mortgage (or a combination of all). The general rule is that it’s always good to pay off any high-interest debts first.
- Take an interest and get control
Understanding what measures are available can make a big impact on how much money you have in retirement. For example, if you earn less than $54,837 you may qualify for a government co-contribution of up to $500 where you make a non-concessional contribution in a year.
Other measures including spousal, after-tax and concessional contributions which again could deliver tax breaks or qualify you for government contributions. Talk to us about the different ways you can grow your super.
- Check in on your super with online reminders
Just like scheduling diary reminders for work or social events or for bill payments, set yourself diary reminders to check your super every month. It is easy to set up these regular reminders on your online balance. Think of it as a ‘reality check’ on whether you are on track for a comfortable retirement.
Source: Colonial First State