Few of us would walk past a sale on something we really needed. But that is, effectively, what millions of Australians are doing with their superannuation right now.
The results are in and the average balanced fund dipped by 3.1 per cent last financial year, according to SuperRatings. A balanced fund includes assets other than shares to provide a more stable anchor for a portfolio.
Look across to growth funds, which were far more exposed to the ASX 200’s 10.2 per cent fall, and on Chant West data they finished the year down 6.3 per cent.
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Even so, just 14 per cent of people make regular contributions to their fund, which, don’t forget can be pre-tax and therefore have a double whammy multiplier effect, devoting even more money to discount share shopping.
What Aussies are doing – or not doing
Exclusive research for Yahoo Finance from Finder shows an overwhelming 86 per cent of Aussies don’t salary sacrifice and are missing out on potential returns.
Just 19 per cent have made one-off contributions – ever.
Most concerningly, however, nearly half of Aussie super fund members have no intention of bulking up their balances in these bargain times.
Yes, these are also expensive times. But you may be wasting the use-it-or-lose-it ways to find the money to buy cheaper shares, more cheaply.
How to pay less for FAR more
We’ve already talked about making more of your money by salary sacrificing into your super, which means you save all the tax that you would ordinarily pay on that money.
But there are a couple more little-known that lower income earners can use to do the same.
By working the super system amid sharemarket craziness you’d be helping to boost your bottom line significantly in retirement.
These two strategies involve contributing money after tax… and get you more regardless.
Super sale strategy one: For just $19 a week
If you are able to set aside this amount each week, you amass $1,000 before the end of the year.
Under a scheme called the co-contribution, a $1,000 after-tax payment will earn you an extra up to $500.
That’s an instant 50 per cent return. Which is better than you can get guaranteed, just about anywhere.
To be eligible you have to earn less than $57,016.
Below the lower income threshold of $42,016, the full $500 is paid. It phases out and disappears at the higher threshold.
Another criteria for this one is that you must make at least 10 per cent of your income from employment.
You must also have a total superannuation balance less than what’s called the general transfer balance cap as at June 30 the previous tax year. For the June 30 just gone, it is $1.7 million.
Super sale strategy two: For just $58 a week
Jumping up in cut-price price point, is the so-called spouse contribution. And you guessed right: if you are the lower earning spouse, you don’t have to come up with this money yourself.
Here, an after-tax contribution of $3,000 a year, nets the payer a tax rebate of $540.
That’s a beautiful thing because a tax rebate is - to carry on the cost-cutting theme - a straight-up discount off your end-of-year bill.
The higher earning spouse pays the $3,000 into the super fund of the lower earning spouse.
That spouse must be on less than $40,000.
But this is a broader scheme in that the receiving spouse does not have to be working at all.
And guess what, you can do strategies one and two at the same time, to dramatically swell a fun fund.
Why this is such a good opportunity for families
With men still typically retiring with super balances 26 per cent higher than females, both of the above can help a great deal… help women match their men.
Indeed, anyone who is eligible should aim to do them each and every year.
What’s more, in times they are earning, perhaps in between raising children, research by Finder shows that a monthly salary sacrifice contribution of $236 would fix the typical female shortfall.
Remember, with shares in a price dip, you are getting more bang for your (boosted) super buck.
Bear in mind, too, that super just turned 30. Despite a few down years - and there have only been a buying-opportunity few - SuperRatings says the average annual return has been 7 per cent over that period.
That means one dollar invested in 1992 has grown to $7.67.
And that’s why extra, clever contributions really count.