
Would Your Let Your Boss Choose and Buy a New Car For You?
Would you let your boss pick out your car?
Probably not, unless you’ve got a really generous boss who knows exactly what you like in a car.
Most likely, they’d get you the cheapest car with just the basics. Sure, it might get you from point A to B, but would it really suit you? Would it be comfy? Good on fuel? Big enough for your needs? Would it have enough power? And hey—would you even like the color?
These are things we think about when buying a car. So, why let your boss pick your super fund?
A lot of people just go with the super their job sets up for them without thinking twice.
Now, I’m not saying that the super fund you have is wrong for you. I’m just asking if it’s right for you as you start thinking about retirement.
Some funds work well for retirement, and some don’t. Here’s what to think about when choosing the best super setup for you.
Understanding Super Funds
All super funds have the same basic tax rules:
- While you’re working, income is taxed up to 15%, and capital gains are taxed at 10%.
- There are rules for adding money to your super.
- When you move to an account-based pension in retirement, your income and gains are tax-free.
So, super is mostly about tax benefits first and being an investment vehicle second.
I don’t focus too much on which specific super fund clients use. What matters more is how your super is set up for retirement.
Retirement is Different
When you’re working, the goal is to grow your money, take some risks, and build your wealth. But as you get closer to retirement, it’s time to shift gears.
In retirement, it’s more about protecting your savings and making sure it lasts.
Here’s what you’ll want your super to do:
- Protect your money during tough market times.
- Make sure your income is safe and not affected when markets drop.
- Have the right level of investment risk. Many people near retirement still think in “growth mode” and might be taking more risk than they need to.
You’ll need a super fund that’s flexible and lets you adjust your retirement strategy as your income needs change.
Smart Moves Before and During Retirement
Here are a few strategies to think about as you get ready for retirement.
- Smooth Transition – Some funds require you to sell assets when moving from an accumulation fund to an account-based pension, which can add costs and risk. Other funds let you transition smoothly without this hassle.
- Re-Contribution Strategy – To reduce the tax impact on what you pass down, you may consider a re-contribution strategy. But some funds make this tricky, requiring you to sell, move funds, and pay extra costs. The right super fund lets you do this internally.
Boost your age pension and have an income for life
Have you heard of Innovative Income Streams?
What the heck are these, you might say?
Chances are you’ve never heard of them, but they are gaining traction.
A number of years ago, the government made some legislative changes to improve the retirement outcomes for Australians.
Super fund providers were tasked with the job of creating products to assist in addressing the longevity of Australians. Finding a way to make sure they had money for the rest of their life in the form of lifetime pensions.
The general idea is you’d allocate some of your super to an innovative income stream. It would pay you an income for life. A fair chunk would be exempt for age pension calculations.
In this circumstance, you’d diversify your income streams between account-based pension, lifetime income stream and age pension.
We’ve seen jumps in income of $10-$20k a year for some clients and upward of over $100k in extra income in retirement. Over and above a standard account based pension option.
If you have assets under $1.5m outside your family home, you’d be made not to consider this in your retirement planning.
The earlier consider this type of strategy the bigger the benefits you’ll get.
Not All Super Funds Are the Same
Some funds give you lots of options to create a personalized retirement plan, while others don’t. You need to make a wise choice as retirement gets closer.
Many people reaching retirement age are still in “growth mode” but need to switch to “decumulation mode,” where the goal is to keep your money working for as long as you need it.
The main question is: do you have the right super fund to meet your needs?
Just like your boss might not know what car is best for you, many super funds set up by employers don’t necessarily match your retirement goals.
You need to understand your future cash flow needs, how much safety you need, and if your super fund can deliver the income you’ll rely on for retirement.
Do You Have the Right Retirement Plan?
This post is just a small piece of what goes into a solid retirement plan.
If you want to make sure your retirement is on track, understand what you’ll need, spot any blind spots, and create safety buffers, why not book your Retirement Clarity Call by clicking here?
There are no expectations on this call—just a chat about what you’re aiming for and tips on planning a comfortable retirement.
Glenn Doherty – CFP – Financial Planner | Retirement Planning Specialist |Retirement Planning Made Simple for over 55’s within 7 years of retirement