Super in your 40s. It’s time to get focused

By Ali Roshan

As more Australians now work longer, there is a greater opportunity to boost super. However, we are also living to older ages, so the superannuation balance needs to last longer too.

Typically, the forties are a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget and retirement seems a long way off.

As you pass the halfway mark of working life, it’s time to give retirement planning a bit more attention. Small changes in your forties can translate to significant benefits in retirement.

For example, a 45-year-old today will reach ‘retirement age’ in 22 years. Taking inflation into account a couple will, by then, need around $120,385 per year if they want to enjoy a ‘comfortable’ retirement. Looking at this example, with only two short decades until retirement age, what could a 45yr consider to ensure they have sufficient funds in retirement?

At this age, a popular strategy for boosting retirement savings is ‘salary sacrifice’ in which you take a cut in take-home pay in exchange for personal tax concessions and additional pre-tax contributions to super. If you are self-employed, you can increase your tax-deductible contributions (within the concessional limit) to gain the same benefit.

Salary sacrificing provides a double benefit. Not only are you adding more money to your retirement balance, these contributions and their earnings are taxed at up to 15% within superannuation. If you earn between $120,001 and $180,000 per year that money would otherwise be taxed at 39% including Medicare Levy. Sacrifice $1,000 per month over the course of a year and you’ll be $2,880 better off just from the tax benefits alone.

It’s important to remember that if combined salary sacrifice and superannuation guarantee contributions exceed the annual cap ($27,500 for 2021/22) the amount above this limit will be added to your assessable income and taxed at your marginal tax rate with an offset.

The forties are an important decade for wealth creation as there are many things to consider. So, ask your licensed financial adviser to help you make sure the next 20 years are the best for you and your super.

Ali Roshan is an Authorised Representative (ASIC No. 000378611) of Lifespan Financial Planning

ABN 23 005 921 735 AFSL Number 229892

No Advice Warning / General Advice

The purpose of this article is to provide general information only and the contents of this website do not purport to provide personal financial advice. EQ8 strongly recommends that investors consult a financial adviser prior to making any investment decision.

The contents of this EQ8 article does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.

The information is selective and may not be complete or accurate for your purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.

1. Future value of $62,828 – the income calculated to provide a couple with a “comfortable” level of income as calculated by The Association of Superannuation Funds of Australia (ASFA) March 2021) – in 22 years at 3% inflation.