I know nothing about super. How do I ensure a comfortable retirement?

I am 59 years old and my husband is 58. We both intend on working until we are 67 and 63 respectively. We have recently moved to a smaller property worth $1.5 million but still owe $50,000 on it. It will be our forever home. We have no other real-estate assets. My husband has $450,000 in super, and I have $380,000. He earns $140,000 a year and I earn $120,000 a year.

We would like to live a comfortable retirement – what can we do to ensure we can do so? I am not financially savvy – I don’t even know how superannuation works! Can you explain things to me in a very basic way, please?

Super can be a complex beast, but understanding even a little bit later in life can make a big difference.Credit: Simon Letch

You are on the right track, but you should do a budget to work out how much you think you’ll spend when you retire, and then take advice about how much superannuation you will need to reach that goal.

A negative aspect for super can be loss of access until you reach 60 and stop working in a job, but given your ages that is less of an issue for you. The great thing about super is you can make contributions from pre-tax dollars and after you retire all withdrawals are tax-free.

The maximum deductible contribution is generally $30,000 a year but this includes the 11.5 per cent employer contribution. The employer should be putting in $16,100 a year for your husband and $13,800 a year for you.

This allows you space to make tax-deductible contributions of $13,900 and $16,200 respectively, or even more if you have unused contribution cap space from previous financial years. You can continue doing this until you are 67. If you do that I’m sure your retirement dreams will be realised.

A major goal for most people should be to retire debt free.

I am 60 and owe $350,000 on my home loan. I am about to get $250,000 from the sale of my parents’ property. Have been tossing up whether I should pay $250,000 off the home loan or put that money into super. I hope to retire late next year.

Given the relatively short timeframe until your retirement the difference in the rate being charged on your mortgage which is certain, and the returns from your super fund which are somewhat uncertain, I think your best course is to pay the money off the home loan which should reduce the balance to $100,000.

For the last 15 months of your employment, make sure you put the maximum allowable into super and use that and other every resource possible to pay off the home loan. A major goal for most people should be to retire debt free.

I’m 59 – my work income is about $20,000 per annum and my investment income is about $120,000 a year. My super balance is $900,000. My mother wants to give us an early cash inheritance. The amount for me should be $250,000. Can I get her to put this money directly into my superannuation fund or do I need to receive the money into my account first and then contribute to super?

The best strategy would be for your mother to give you the money directly, and then you dribble it into the super at the rate of a tax-deductible $30,000 a year including any employer contribution. On top of that, you could reinvest the tax refund the contribution would create by also putting that into super as a non-concessional contribution.

My wife and I have pensions with reversionary nominations in favour of each other. Once one of us dies, (a) the survivor will receive two pension streams until their death and (b) the survivor will need to nominate a binding death beneficiary for both those pension accounts to replace the previous reversionary pension nominations. Have I got that right? Balances are about $1.54 million each and we are close to the maximum transfer balance caps.

On a related issue, some component of the two pension accounts the survivor will then have will be taxable on the survivor’s death unless they have withdrawn some or all of it prior to their own death. Have I got that right?

You are on the right track. The survivor can take over the reversionary pension provided their remaining transfer balance cap space can accommodate its balance.

Otherwise, taking advice to appropriately restructure within 12 months of death will be critical to avoid excess cap issues. New death benefit nominations should also be put in place.

On the survivor’s death, any taxable component remaining within the pensions will be taxed for beneficiaries such as non-dependent adult children.

Again, getting advice now with a view to implement strategies such as cashing out and recontributing part of your super balances while both of you are alive (if under age 75) can minimise the taxable component and accordingly, the death tax payable in the future.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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