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Personal Finance > Life Stages > Saving for retirement > Laying the Groundwork

Laying the Groundwork

With an ageing population giving the government the jitters about how much it's going to cost them to support all the old-aged pensioners, it's safe to assume the best person to look after you in your retirement is you - financially speaking that is.

Most people are likely to rely largely on their superannuation, which, after the family home, is likely to be your most valuable asset by the time you retire.

Because it's so important, in 1992 the government introduced the superannuation guarantee. This means employers must contribute a minimum of 9% of your base salary into a super fund, which kind of makes super a long-term savings plan that happens throughout your working life.

The nice thing is that you don't have to worry about it, it just happens - as long as you are employed, that is. If you are out of the workforce for any length of time due to redundancy, taking time out to travel or study, you will have fewer working years to accumulate super.

While compulsory super will help you fund your retirement, it may not give you the retirement lifestyle you want. And with an ageing population competing for the pension pool, not to mention the fact that statistically life expectancies are rising, combining pension and super income may not do it either (assuming you are eligible for a pension, currently just over $12,000 a year for a single person, around $20,000 for a couple).

You can arrange to have more of your salary put into super through 'salary sacrifice' by having your employer invest an additional portion of your pre-tax salary into a super fund for you. Salary-sacrificed contributions are taxed at lower rate than the marginal tax rate, which for most investors would probably mean a tax saving.

In addition to tax benefits, the Government has created further incentives to encourage eligible Australians to save for their retirement through super, including the Government co-contribution scheme - depending on your level of income, the Government may match up to $1,000 of your contribution.

You can also contribute on behalf of your partner, under the spouse contribution tax offset, encourages people to invest in super on behalf of their non-working or low income earning spouse.

With so many options with super alone, it's time to get some good advice, and to start planning.


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