Superannuation is one of those words that everyone in the world has heard of, but when asking people how much they should save for retirement they tend to come up with really shocking answers. The average person is shocked when they are asked how much superannuation they should have. This is because superannuation is a bucket of money that does not grow on trees and it has been treated like a low priority tax deduction. It is not included in your income tax deductions and that is the very reason why so many people fail to maximise on their superannuation. Superannuation is a very important aspect of your total financial picture and it needs to be included in your budget.
Your total financial situation can be better understood when you know how much superannuation you are saving. The average superannuation savings will be somewhere around about three quarters of your total annual income. This may sound okay in today’s economic climate, however if you look at superannuation in this light, it is actually quite conservative. In fact, most people who are actively saving put little or no money aside at all for a secure retirement.
One way of calculating how much superannuation you should have in retirement is to work out the amount of money you would need to fund a Secure Future Cover (SFC) – which is the most commonly recommended type of investment for retirement. With SFC, you will pay out regular income tax which you will then withdraw from and invest in a superannuation fund that earns dividends. You will pay tax each year on this dividend which is not taxable until the fund reaches a certain size. If you can withdraw tax immediately off of your super fund, it is probably best to have more money in the fund than you need.
How much superannuation should I have is based on your current age and current weekly salary. For example, if you are currently aged 35 and earn a weekly wage of just under forty thousand dollars, then you should aim to have about five percent per annum in your superannuation fund. This is the average super fund balance for people in your same situation. The best way to work out how much superannuation you should have is to work out how much annual salary you are currently earning. Once you have this figure you can then divide it by eighteen to get the amount per annum needed to fund your desired superannuation fund balance.
Ideally, the amount of superannuation you should have in place when you retire should be about two percent of your final salary. This means that in twenty years time, if you continue to work until the age of sixty five, you should have about twelve thousand dollars in your superannuation. If you retire at the early age of sixty five, then you will have only five percent in place, and so on. It is important to have enough money in your superannuation account to cater for all your basic living expenses after you retire, like medical fees, mortgage, food, electricity and water, and even for the deposit on your children’s education. You may also want to consider a car or two as well, so that you don’t face too much financial difficulty when they start studying.
Your final retirement income figure is influenced by how much you invest in your retirement account. If you decide to invest in an aggressive venture and your investments bear little or no fruit, then you will have to liquidate some of your investments to pay for ongoing expenses. However, if you choose the safer investments and they bear most of the burden, you will have a higher retirement income. Your final retirement income figure will be influenced by various factors, including the age you reach, the lifetime earnings potential of your chosen profession, the amount of money you contribute, and your investments’ performance.