Financial planning is really about… super

Super is the main plank of the Government’s retirement incomes strategy.

Super should be the main plank of your clients’ retirement incomes strategies too. Virtually every client meeting should discuss and consider super and how more can be paid to super as the years go by.

To this end it has created a set of tax incentives that encourage self-funded super. These tax incentives include:

  1. deductions for concessional contributions, subject to age-based limits.
  2. low tax on investment earnings while in accumulation mode.
  3. no tax on investment earnings once in pension mode
  4. little or no tax on benefits paid after certain ages.

These tax incentives means it makes sense to advise, even urge, clients to make their super snowball as big as possible, as early as possible and then get it rolling as fast and as long as possible. And add to the snowball along the way.

It’s the power of compound interest. ASIC has created a great compound interest calculator and you can use it here: ASIC’s Money smart Compound Interest Calculator.

ASIC's-Money-smart-Compound-Interest-Calculator

Every client statement of advice should include a recommendation, even a plea, that they pay extra into super every month. For many this will be all they have to do to ensure their retirement income security.

One suggested standard set of paragraphs is:

Our meeting focussed on super and what you can do now to make sure you have enough later, when you retire.

I suggest you ask your employer to increase your salary sacrifice super contributions by $300 a month. This will increase your final expected super benefit by an extra $100,000 after twenty years.

This is roughly what the average person receives in total on retirement.

The Dover Group