Can you afford to ignore your Superannuation?

Posted on by Mark Fernandez

What are the issues?

Retirees have faced a number of headwinds in recent years that have called into question their ability to achieve the lifestyle they may have previously envisaged for themselves.

A prolonged period of poor investment returns is now being compounded by falling interest rates and rising utility costs, squeezing the level of disposable income available to enjoy their retirement. 

For younger generations the lesson may well be the need to save more to achieve a rising standard of living, both now, and in retirement. 

In reality the capacity for young households to increase savings is limited given debt levels remain historically high as outlined below:

Whilst recent interest rate cuts by the RBA may have relieved some of the pressure on debt servicing requirements, this is being offset by a number of other competing factors such as falling job security, rising utility bills and education costs.

 Where will the savings come from?
Thankfully for many employees receiving mandated employer contributions recent legislative changes will result in an incremental increase from the 9% superannuation guarantee rate at present to 12% by July 2019.

For the Self-employed there is no compulsory requirement to contribute to superannuation.  However, there is the capacity to make tax deductible contributions of up to $25,000 per annum and it is important that you take this into account in both your annual tax planning discussions with your accountant and longer term wealth accumulation plan with your financial adviser.

What does this mean for superannuation?
With superannuation being the only significant source of savings for many households with high debt levels it is important to have a good handle on the things you can control including:

–  Ensuring the investment strategy meets your needs

–  Regularly reviewing the investment strategy to ensure it remains appropriate as financial markets and your circumstances change

–  Ensuring that your superannuation arrangements are cost effective and balancing this against the ability to select the investments that suit your needs

Where you do not have the time or expertise to stay on top of these arrangements it is important to get the right advice.  Superannuation is too important to simply ignore.

Gavin Hannagan

Phone (08) 9476 3956

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