Bruce Brammall: Use these spidey senses to awaken your superannuation strength and boost your nest egg

I refer to it as the “retirement spider” — the nasty, hairy surprise that drops from behind the car visor on to your lap, a few years before your final clock-off. For some reason, though you’ve been working for 40-odd years, it’s just dawned on you retirement is fast approaching. And it scares the crap out of you. It doesn’t happen to everyone. Those who’ve been preparing for it for five or 10 years had a dose of insect repellent applied as part of those preparations. No hairy-legged spiders for them. But if the damn thing lands in your lap, and the hairs on the back of your neck are standing tall, I hope you are sitting in the driveway and not on the freeway travelling at 100km/h. Prepare early Bizarrely, retirement has a habit of sneaking up on people. Obviously, it shouldn’t. But with life through your 40s and 50s generally crammed full of raising a family, covering a dirty big mortgage, and trying to advance your career to earn more, to cover even more … it’s sort of not a surprise that it does. Obviously, the best time to prepare for retirement is your first day of work with the first payment that goes into a super fund in your name. But who the hell is thinking about that in their teens or 20s, when they get their first pay cheque and their first taste of freedom? Not. A. Single. Person. Sad. Because that first deposit into your super fund, if done properly, could literally double your super fund at retirement. That’s a topic for another day. When’s too late? Technically, there’s probably never really a time that’s too late. But realistically, you can’t make as much of a difference in the last few years, obviously, compared with doing the same sorts of thing for longer periods. If the retirement spider jumps out with at least five, preferably 10, years before retirement . . . as much as you’ve possibly just soiled your strides, you’re in luck. If you’ve got a decade, you’ve got plenty of time to make a huge difference to your retirement — potentially enough time to even pull it forward a few years, with the right decisions and strategies. A super focus By the time you’ve hit 50-something, you’ve probably done the hard yards on raising kids and reducing the monster mortgage, and are likely to be earning more money than you ever have — or so say the statistical averages. There are loads of different ways you can make those changes that will make a significant difference to your retirement, most of which include making some sacrifices. You can save more, invest more, pay down the mortgage harder, make a few sacrifices to get money to where it really should be. But let’s talk about super, and what can be done there. A little sacrifice The real point of super is the low-tax environment. The Government taxes it lightly (15 per cent maximum) as a way of encouraging people to contribute to their super for retirement. Sure, the biggest portion of those contributions is generally made by employers on behalf of, well, you. But via super sacrifice, or voluntary contributions, you can add to it and potentially save significant amounts of tax in the process. Take $10,000 of income. If you’re an average income earner, you are paying 32¢ in the dollar. If you put it into super, it gets taxed at only 15 per cent. There’s a saving of $1700 a year, times, let’s say, 10 years until retirement. But everything it earns is then only taxed at 10 or 15 per cent, versus up to 32 per cent in your own name. The tax savings compound, annually. And, when you get to retirement and start drawing a pension, it’s tax-free. If you’re earning in excess of $135,000, the tax savings are even larger. If you’re above $190,000, the tax savings are greater again, but your ability to put extra into super is diminished because of concessional contribution limits that currently sit at $30,000. In any case, take one thing away from today’s lesson if you’ve just realised how close retirement is. Or, if the spider hasn’t landed yet, try to remember this. If you have at least five years until retirement, you have time to have a huge impact on your retirement. And if this has hit a nerve, get advice. Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and mortgage broker. bruce@brucebrammallfinancial.com.au