Topping up your super can boost your retirement nest egg. But is there a right time for voluntary contributions?

Table of Contents

Chucking some extra into your super might give you a better crack at a more comfortable retirement, but with heaps of other financial obligations floating around, is it the right time to splash out some more?

As per ASIC's Moneysmart, a 30-year-old egging on an extra twenty bucks a week could be fifty thousand dollars better off in retirement – and there's also potential tax savings from chucking in a little extra super cash.

It's not always straightforward to find the spare change for saving, particularly considering the current economic landscape, and contributing extra to super regularly may not always be the best decision.

We spoke to two industry specialists to explore when this approach makes sense and give you a better grasp of the potential advantages and disadvantages.

First, cover the basics

Kate McCallum is a financialulator and co-author of The Joy of Money.

If you're in your twenties, thirties or forties, you're probably dealing with some pretty big financial challenges, Ms McCallum reckons. These might be things like paying your rent, saving up for a house, paying off a mortgage, school fees and the usual costs of living.

If you've got outstanding consumer debts like credit cards or personal loans, servicing them should be a higher priority than boosting your superannuation.

Fair dinkum, that's because the interest rates on these products are as high as a kite, and payin' 'em off gives you a certainty of a return.

enough to cover at least three months of living expenses

Along with the serenity of feeling financially secure, it can also help dodge the necessity of taking on debt for unplanned expenditures.

Why youths should consider carefully before contributing more to their superannuation savings

Ms McCallum says you gotta keep in mind your total financial set-up and what you're after before you reckon about putting more money into your super.

It's pretty important, quite frankly, that most people can't dip into their super until they hit their preservation age, which is between 55 and 60, depending on their birth year.

So, if you're 30, and you put money in your super account, you could have it tied up for 30 years or more.

For those reasons, Ms McCallum says voluntary super contributions are generally more practical for people over 45, who can access their funds sooner.

Fair dinkum, she reckons younger blokes should focus on other priorities and rely on compulsory super contributions from their employers.

"If you're in your 20s or 30s, possibly even early 40s … then it's logical to just let … the super guarantee do its job and utilise the excess cash flow in other areas so you've got more flexibility," she says.

instead.

If you're paying off a mortgage, you might consider keeping your savings in an offset or a redraw facility.

How voluntarily contributing to your super can help reduce your tax bill

You can make a "concessional contribution" to your super by setting up a salary sacrificing arrangement with your employer or by making a direct deposit to your super fund and claiming a tax deduction.

The strategy could be appealing because these payments are only taxed at 15 per cent, which is a lot less than the 30 per cent taken off a typical Aussie's weekly pay.

Because of this, when you get more money, it makes sense to add a bit extra to your super, as the tax benefit will be bigger.

Is it a good idea to make super contributions when you're not actually working?

If you've stopped work to have a kid or take care of someone, you're probably concerned about your super balance and might be thinking about topping it up.

Even though you can still put extra into your super during these times, you're probably making less, which could decrease any tax benefits you might get from contributing to super before taxes.

you can claim a refund of up to $540.

, which involves one partner splitting some of their super contributions with their partner.

How contributing to super can help you stow away for your first digs

While most people can't take their superannuation until they're in their sixties, there are some exceptions.

The First Home Super Saver (FHSS) scheme lets first home buyers pull out up to $50,000 of voluntary contributions, plus the earnings on those contributions, to help with their purchase deposit.

Including around withdrawals, which is one reason it hasn't been popular. But independent financial planner Jacie Taylor says it can be a useful strategy for people who are setting aside funds for a deposit.

"It's just a fantastic idea that isn't well understood by many," Ms Taylor says.

Remember, you'll be up for a penalty if you decide not to buy a property after getting funds out of the scheme.

Fair dinkum, you might be able to increase your superannuation without having to put in any extra tucker.

Even though you might not be able to put in any extra money, there are still plenty of ways to make sure your super is working hard for you.

Ms Taylor says it's crucial to take a look at where your super's invested and the fees you're being charged.

If you're fairly young, Ms Taylor reckons you might find it worth looking into putting your super into investment options that are expected to grow faster, as they usually give you a higher return over time.

"It means a world of difference for young blokes," she says.

If you're not sure if a voluntary super contribution strategy is suitable for you, it might be helpful to get the advice of a financial planner or adviser.

This article is just some general information. It's a good idea to get some independent expert advice about your individual situation.