21
April
2017

Superannuation still the best avenue for retirement savings

Changes to the Superannuation system - have you lost faith?

Proposed changes to the Superannuation rules have recently garnered some attention in the media and have led to some losing faith in the Superannuation system.

Since the changes were announced at the recent budget a number of media outlets have run stories on Superannuation with fear of uncertainty being the underlying theme, and why not, nothing drives ratings like fear.

The recent changes focused on limiting how much money people can get into superannuation, and these contribution limits will pose some challenges in pre-retirement strategies. The reason this is an issue is that Superannuation is an attractive option, particularly in retirement, and the limits will force savings to be directed elsewhere.

A recent 60 minutes story focused on the limitations of the Super system and the fact that many Australians are working longer. It also casted a little doubt over whether Super was the best option.

It is correct to say many Australians will not have enough savings for retirement. A number of factors have led to this, most notably the dramatic increase in life expectancy, but things like increased household debt and Children living at home longer also impact.

It will be necessary for some to work longer to build retirement savings and reduce debt. Planning for this early is the best way to avoid working significantly longer than planned. Having a least a small focus on retirement from a young age is encouraged.

For many people in when they are younger they have a strong focus on buying a house, paying it off and direct a large portion of their cash flow to their children. In the last 5-10 years before retirement those goals take up significantly less of the overall cash flow and only then does retirement become the primary focus.

The new contribution caps significantly impact that approach as when retirement becomes the sole focus, many would be in a position to invest more than the new caps but are now restricted.  They are however able to save for retirement outside the Super system. This is not as beneficial but still allows us to better position ourselves for retirement.

60 minutes also alluded to the new legislation that caps the maximum contribution from super to allocated pension at $1.6 Million. This does not prevent you from saving more than $1.6 Mil in the super environment; it limits the amount that you can invest in the tax free environment to $1.6million. Any retirement savings above this limit can remain in the Super environment and will be taxed at concessional rates instead of tax free.

 

These changes make it harder to contribute to Superannuation; however the tax benefits associated with Superannuation still make it a very attractive option.

 

Author; Alex McKenzie Categories: Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services

Past:

  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State

Education

  • University of Western Sydney
  • Penrith High

About

As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

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