{"id":8050,"date":"2018-06-04T09:09:38","date_gmt":"2018-06-03T23:39:38","guid":{"rendered":"https:\/\/jigsawprivatew.wpengine.com\/?p=8050"},"modified":"2021-08-12T17:07:20","modified_gmt":"2021-08-12T07:37:20","slug":"the-sexy-side-of-salary-sacrificing-into-your-super-fund","status":"publish","type":"post","link":"https:\/\/jigsawprivatewealth.com.au\/the-sexy-side-of-salary-sacrificing-into-your-super-fund\/","title":{"rendered":"The Sexy side of Salary Sacrificing into your super fund!!!"},"content":{"rendered":"

Yes, you heard me right, salary sacrificing into your super fund can be sexy, unless you believe you have no future…<\/p>\n

Salary sacrificing is the main contribution strategy we use with clients to help them with their retirement planning\u00a0so they can ensure they can live the lifestyle they want when they give up the rat race and retire.\u00a0 However, the landscape has changed somewhat which means starting earlier is more important than ever.<\/p>\n

We are going to discuss the ins and outs of salary sacrificing so you have the information at hand to help you build your retirement nest egg.<\/p>\n

Now, I did say salary sacrifice was sexy? This strategy is no different than what’s needed to getting fit or studying.<\/p>\n

You’re doing the hard yards with the expectation you are going to get a payoff in the future.<\/p>\n

My trainers keep telling to earn your weekend.\u00a0 That is work hard in your workout so you can enjoy yourself on the weekend without any guilt, now that sounds pretty good to me.<\/p>\n

You could be keeping fit to look good, you would have studied to get a job and progress into your career which both provide an end benefit you can enjoy, one happens to be health related while the other income related.<\/p>\n

In the last few weeks, I have had some detailed discussions with clients who are retired and talking about what it is that they still haven’t accomplished.\u00a0 One, in particular, we were talking at lunch recently.\u00a0 \u00a0They are in their early 70’s, live a pretty active life and we discussed what else they wanted to tick off their list.\u00a0 I was surprised with the answer.<\/p>\n

They still had a number of overseas trips planned, they were ticking a once in a lifetime one off this year to Antartica, however, the wife wanted to see polar bears in real life.<\/p>\n

Other clients have travel plans as well, some want\u00a0to ride horses, some want to travel around Australia in a caravan with no fixed return dates.<\/p>\n

I have one couple who have recently retired in their mid 40’s to sail the south pacific with no fixed return date.<\/p>\n

Now that all sounds pretty sexy to me, I know I’m jealous.<\/p>\n

You may be someone who has no major plans but just wants the flexibility to pursue your own interests and provide options when you retire, thats ok, everyone is different.<\/p>\n

But, here’s the thing, none of this happens without some hard work.<\/p>\n

One of the strategies we use to help clients build their retirement nest egg is salary sacrificing.\u00a0 Now to most super is pretty boring right, it’s enough to put you to sleep and I hear you, the govt keeps changing the rules.\u00a0 I’ve heard every excuse under the sun why people don’t implement this strategy but there are a couple of powerful reasons why you should be doing it.<\/p>\n

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1. It’s going to fund your lifestyle in retirement…<\/span> <\/strong>You know all the countries you want to visit, the dining out or sports an interests you want to partake in or just having a great time.\u00a0 Now, that sounds pretty sexy to me.\u00a0 But like most things in life, there’s a little hard work involved.\u00a0 Yes, you’ve got to give a little today to provide for tomorrow but nothing is served to us on a silver platter anymore.<\/p>\n

2. You save some tax…<\/span> <\/strong>It’s an Australian past time to save as much tax as we possibly can and this is one way you have the government help contribute to your super fund.\u00a0 Here’s the thing you contribute to your super fund and instead of paying tax at your marginal tax rate you pay 15% tax.\u00a0 Now for most that’s way less than the tax you are paying.<\/p>\n

3.\u00a0 You get a fantastic return on your money…<\/span><\/strong> Most don’t see this part of it, they see it as not having the money to spend now.\u00a0 In most cases, it’s a minimum 30% return before you invest the money. Not sure where you can get a guaranteed return like that these days.<\/p>\n

Let’s look at an example.\u00a0 Let’s say you contributed an extra $100 pw into your super fund via salary sacrifice.\u00a0 That’s $5,200 over the entire year and let’s look at a 10yr time frame.<\/p>\n

If you are on the 34.5% tax rate (earning under $87,000pa).\u00a0 If you invested this money outside super out of the $5,200 you would have $3,406 to invest.\u00a0 By salary sacrificing you would have $4,420 to invest, an extra 30% more to invest.\u00a0 Invest that at an average return of 6.5% and you would have approx $54,645 inside super instead of $45,562 if invested outside super.\u00a0 That’s an extra $9,083 at end of 10yrs.\u00a0 Might not sound a lot however it’s only cost you a $100 a week and one of the best returns you will get on your money.<\/p>\n

If you are on a tax rate of 39% (earning between $87,001-$180,000) and you invested the same way, an extra $100pw you would have $4,420 to invest inside super compared to $3,172 outside super.\u00a0 That’s nearly 40% more to invest.\u00a0 Invest over a 10yr period and at the end of the 10 yrs you would have $54,645 inside super instead of $42,804 invested outside super.\u00a0 That’s an extra $11,841 at the end of 10yrs.<\/p>\n

Start to increase the amounts and start a lot earlier and these amounts start to really compound over a longer period of time.\u00a0 It’s why we encourage clients to start earlier than ever and let the natural wonder of compound do its thing over a long period of time.\u00a0 This is not sexy, but the hard work will lead to a sexy outcome…<\/p>\n

Oh yeah, and another benefit inside super is the ongoing tax rate of 15% and it’s capital gains tax free if you sell an investment when you are retired and income phase.<\/p>\n

4. You get to take advantage of Compounding…\u00a0<\/span><\/strong> One of the great wonders of the world.\u00a0 Small contributions over a long period of time compound, and they compound at a greater rate the larger the balance.\u00a0 Now for a finance person like me, this is pretty sexy, but it can boring to most, but Rome wasn’t built in a day.<\/p>\n

So, let’s look at why you wouldn’t do it…<\/span><\/strong><\/p>\n

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  1. The government keeps changing the rules…<\/strong>\u00a0<\/span> That may be right but superannuation is still the most tax effective structure going around today.\u00a0 You may as well use it to your benefit while you can.<\/li>\n
  2. My money is a risk of being lost, ie like the Global Financial Crisis…<\/strong><\/span>\u00a0 I get it, all super funds perform badly.\u00a0 Are you kidding me, superannuation is a tax structure first which then invests in\u00a0different types of investments.\u00a0 If you want to hold it in cash you can, I wouldn’t though as your retirement fund\/super is an investment that will go on for 20yrs plus in most cases.\u00a0 It needs to be treated as such.\u00a0 You may want to read my article that talks about how you should be invested through market downturns.\u00a0 >>CLICK HERE to read the article>>\u00a0<\/a><\/li>\n<\/ol>\n

    What are the rules and what you need to know?<\/span><\/strong><\/p>\n