Retire richer and sooner by lifting your financial fitness levels

Australia has one of the world’s largest retirement savings stashes and if you want to grab a bigger share consider these tips.

Australians are enjoying wealthier and more active retirements than ever before, and this requires financial fitness as well as a healthy lifestyle.

Most of us don’t start thinking seriously about money for retirement until at least our forties or fifties. While that’s not ideal, it’s not too late to make a big difference to the size of your final nest egg.

There’s a pile of free online tools and other resources from financial institutions and the Federal Government’s moneysmart.gov.au website, and you can follow these five steps to make the journey to retirement smoother.

1. A MONEY HEALTH CHECK

It’s hard to know where you’re heading financially if you have no clue where you are today.

Money specialists recommend writing down everything you spend for a month or two to see if you can spot savings.

It also gives you an idea of your living expenses, which is something to work with when deciding how much you’ll need for retirement.

Moneysmart.gov.au has online calculators to project your final superannuation balance and work out the income you will likely receive from super and the age pension.

Retiring rich starts with saving as much as you can as early as you can, but it’s never too late

2. UNDERSTAND THE TAX BENEFITS

Superannuation can deliver massive tax benefits later in life as the only tax-free structure for holding your wealth. It also has the flexibility to own real estate either directly through a self-managed super fund or through various investment funds that spread money across commercial and residential properties.

Most super fund members pay zero tax on their income and capital gains once they retire after age 60, and they pay lower tax rates during the accumulation phase while building up their nest egg.

For assets held outside super, tax of up to 47 per cent is payable.

3. INJECT EXTRA

People should be contributing as much money as they can into superannuation as early as possible in their working life to give compound interest time to work its magic.

But it’s never too late to start saving, and money you add into super in your 50s could still be sitting there paying you an income 30 or 40 years later.

Every $1000 you put into super typically grows to $1600 after 10 years, and more than trebles over 25 years.

4. USE SUPER INCENTIVES

The government wants us to grow our super so we rely less on the age pension in retirement, so it offers some handy cash bonuses.

People earning up to $53,000 a year can get an annual $500 government co-contribution when they inject extra money themselves, while others who add money to a low-income spouse’s super can get a $540 tax offset.

Most people get tax deductions for making personal contributions to their super of up to $25,000 a year - going up to $27,500 from July 1 - and downsizer contributions for seniors who sell their family home allow them to get big money into super’s tax-friendly environment quickly.

5. DON’T FORGET THE PENSION

A majority of Aussies don’t retire with millions of dollars in super, but their superannuation nest egg combined with a full or part age pension is often enough to deliver the comfortable, active retirement they hoped for.

A full age pension for a couple currently pays $1424 a fortnight, and a healthy super balance provides an extra boost.

The size of that extra boost will largely depend on you.

@keanemoney