A little goes a long way with compound earnings. The earlier in your working life you start paying attention to your super, the better off you will be at retirement. However, it’s never too late to take an interest in your super fund’s performance and take action to grow your super!
While the best strategy is to get familiar with superannuation contribution options as soon as you start earning money, you can take strategic action to increase your super balance at any stage.
Your strategy will necessarily change over time as your work and financial situation evolve. When you're not earning much at the start of a career, you may be unable to contribute extra. However, as soon as you earn more than you need to live off, start making extra contributions and reap the benefits of compound growth.
Compounding happens when you contribute a specific amount to an interest-earning fund and leave the interest in the same account. This way, you keep earning interest on your interest. Check out this table for an example of compound interest earnings. This example clearly shows the advantage of starting to build your super early!
The compound earnings will naturally accumulate as you and your employer continue to contribute to the super fund.
Tips for Growing your Super Balance
- Consolidate super into one fund so you are not paying more fees than you need. If you're unsure which fund you have accounts with, search for lost super in case you have multiple accounts that you can consolidate.
- Make contributions from your after-tax earnings – this may be a good option if you receive unexpected extra income such as a bonus. The government will also make a co-contribution of up to $500 for eligible low to middle income earners.
- Talk to your employer about sacrificing part of your salary into your super fund, which will reduce your taxable income and make it easier to commit to regular contributions that increase your super balance.
- Check options available for your spouse – it could benefit both of you if you’re able to contribute to their fund as well as your own.
- Take advantage of the bring-forward rules if you haven't contributed the maximum amount of super in recent years.
- Make downsizer contributions from the proceeds of the sale of your home.
- Sole traders should consider making personal contributions as a tax deduction – this will require the ATO Notice of Intent form to be submitted to the super fund.
- Check whether your super fund is paying for any insurance – review and adjust or cancel if the insurance is not required.
Get Advice for Your Super Strategies
It’s important to get financial or tax advice before making any large payments to your super fund, to ensure you’re getting the most tax benefits from your contributions. There are limits to how much you can add to your super fund in a financial year and other thresholds that apply to different types of contributions.