Planning ahead
The cost of living increases every year and so does the cost of medical treatment especially if you have any pre existing health conditions, if you smoke or drink alcohol. If you are investing in superannuation funds now then you should consider factors such as inflation, your current health, any health problems you may develop in the future and emergencies. In addition, you should also factor in other things such as your future needs or requirements and if you have any insurance that will protect you when you are ill.
There are various expenses that all of us have to deal with and these expenses include travel expenses and debts such as mortgages, loans. By the time most people retire, majority of these expenses are taken care of, however; if you have taken a long term debt or mortgage then you will have to consider these expenses also.
Saving towards your retirement with super
Although the compulsory contributions made by your employer seem a lot today, after a few years this amount may not be enough to run your household. Due to this reason, you should not only consider saving additional amount of money in your super fund but you should also consider investing the super funds in lucrative yet safe investment options.
It should be noted that there are 4 types of super funds in Australia which are; employer contribution, employee contribution, spouse contribution and self employed contributions.
Concessional and non-concessional contributions
Employer contributions are made by all employers in adherence to the Superannuation Guarantee Act. The contributions made by your employer are set to increase every year until the increment amount is 12%. In most cases this increment quota will be met by the year 2020.
Concessional contributions are also known as deductible contributions and these include salary sacrifice contributions, employer contributions, employee contributions and self employed contributions. It should be noted that employee contributions are voluntary which means that you have an option not to save additional amounts of money in your super fund.
The limits for these concessional contributions are at $25,000 per adult per annum. Usually transitional caps are offered to people over the age of 50 years. It should be noted that these concessions are taxed at 15% but additional contributions over and above the limit are charged at a marginal rate. This also includes the Medicare Levy which implies an additional 31.5%.
Non concession contributions include both spouse and personal member contributions. These non concession contributions are taxed depending on the post tax income. The limits for these non concession contributions are up to $150,000 per annum over a 3 year period for adults that are less than 65 years old. If you are an adult between 65 and 74 years old then the limit is set at $150,000 per year provided you meet the work test rules. Adults over 75 years are not eligible to make non concession contributions to their super funds.