Tips to boost your super when retirement is approaching

2. Make sure you’re with a great fund

Paying high fees or receiving lacklustre returns can really put a dampener on the growth of your account, so taking the time to compare and switching to a quality fund is worthwhile. Don’t fall into the trap of assuming a fund you’ve been with for decades is still right for you or that it’s too late to make a difference.

If you have more than one account, getting everything into a single super fund is a priority unless you have a good reason to keep more than one. Having your savings together makes managing things simpler and can reduce costs.

Be sure to compare your current super fund with others and if you want to switch, get your employer contributing to your chosen fund. Be sure that any insurance cover you require is in place there before closing your old accounts. Once you have everything in order, closing your old account (or multiple accounts) and transferring the balance(s) to your preferred provider via myGov is just a click away.

3. Tailor your insurance and nominate a beneficiary

At this time in your life, your income is likely to be close to its peak and losing it unexpectedly can put a dent in even the best laid retirement plans.

Disability insurance can fill the hole that would be left if you are forced to retire early or take time off because of an illness or injury, and life cover helps your spouse or other family to recover financially if you were to pass away.

Super funds usually offer life/death, total and permanent disability (TPD), and income protection insurance. If you’re not sure how much and what type of cover you need, your fund may have an insurance needs calculator you can use. Many also offer personalised advice to help you decide.

Alternatively, you could also make sure you have adequate death and disability insurance held outside your super.

Insurance tends to become more expensive as we age so be sure to assess whether premiums are affordable and shop around. Some people even choose to go without life and disability cover entirely when there are not many years work remaining if their assets would be sufficient to stop work earlier than planned without any compensation.

Nominating who should receive your super balance (and any life insurance you hold with it) in the event of your death is critical. If you don’t have a binding beneficiary nomination when you pass away, your fund’s trustee must decide who to pay. They may not choose to distribute your super death benefits the same way you would have, and the decision-making process can cause delays for your family.

4. Start investigating how you want to use your super for retirement

There’s nothing worse than trying to make a big life decision without the knowledge you need to make an informed choice. Now is a great time to start thinking about what your super needs to do for you once you stop working.

Will you need to take some as a lump sum, invest in an account-based pension, consider a product that guarantees income for life, or a combination of some or all the above?

Take a look at your super options when you retire to make a start.

5. Keep in touch with your money

Set up online access to your account and/or download your fund’s app. Having everything at your fingertips makes it simpler to grab the details you need if you want to add a contribution or make changes.

Contribution tips

1. Get a co-contribution

If you’re a lower income earner, making an after-tax (non-concessional) contribution to your super may entitle you to a co-contribution from the government.

The maximum co-contribution of $500 is available in 2024–25 if you contribute $1,000 and earn below $45,400 during the financial year. The more you earn, the smaller the co-contribution you are entitled to, until it cuts out entirely for people with total income of $60,400 or more.

You can get a co-contribution every year while your income is below the upper limit, and the income limits increase every year.

The amounts may seem small, but a 50% return on your investment with no risk is hard to turn down and compound growth from investment returns sweetens the deal even more.  

2. Reduce tax and pump up your balance with regular concessional contributions

Making voluntary concessional contributions (salary sacrifice or personal contributions you claim as a tax deduction) can reduce your income tax and increase the amount you can afford to save in super. This is thanks to the difference between marginal tax rates and the super tax rate of 15%.

For example, if you can afford to put aside $150 a week for retirement and you would usually pay 32% income tax on that money, you could contribute approximately $220.60 per week to super by salary sacrifice before tax. This would reduce your take-home pay by $150 but add $187.50 to your super after 15% super contribution tax is deducted.

There is an annual cap on concessional contributions ($30,000 for the 2024–25 financial year) but you may be eligible to contribute more thanks to the carry-forward rule.

To contribute more than the standard concessional cap, your total super balance must have been below $500,000 on the last 30 June and you must have some unused cap space available from the last five years.

Check via myGov to confirm your eligibility and how much you can contribute.

It is also important to note that those with total income plus concessional contributions of $250,000 or more per year pay additional tax (division 293 tax).

3. Is a transition-to-retirement pension for you?

When you turn 60, you have the option to use your super to start a transition-to-retirement (TTR) pension. A TTR pension provides the opportunity to withdraw between 4% and 10% of your account balance each financial year, and the income is generally tax free.

So, why would you want to make withdrawals if you’re trying to build up your balance? It can make sense if the additional income will allow you to increase your concessional super contributions.

If you’ve had your 65^th birthday and are still working, you can follow the same strategy outlined in our example but use a retirement pension instead of a TTR. A retirement pension has no maximum annual withdrawal and investment earnings are tax free (versus tax of up to 15% on investment earnings in a TTR), making the option even more attractive.

Using a strategy like this is complex and you may require personalised advice. You can read more in How a transition-to-retirement pension works and view our webinar.

4. Think about lump sum contributions

If you have savings you don’t need to access readily, you sell an investment, or you receive a bonus or inheritance, a lump sum super contribution is worth looking into.

Lump sum contributions can be either concessional (by claiming a tax deduction) or non-concessional. The annual cap for non-concessional amounts is four times the concessional cap ($120,000 in 2024–25) and you may be eligible to contribute even more using the bring-forward rule.

A lump sum concessional contribution could reduce your income tax (including capital gains tax on the sale of an investment).

A non-concessional contribution is not tax deductible but will help increase your super balance where investment returns are taxed at a maximum of 15%.

When you’re coming up to retirement, the decision to put a lump sum into super can be less painful since you won’t lose access to your money for long. You might even consider a lump sum tax-deductible contribution every year to maximise your tax savings and super balance while you still can.

Investing tips

1.  Check you’re in a suitable investment option

If you don’t choose your investment when you open a super account, your savings will be placed automatically into your fund’s default choice. In many cases, this means 65–80% of your account will be allocated to growth assets such as shares, property, and alternatives with the remainder invested conservatively into cash, fixed interest and bonds.

In the long run, growth assets generate higher returns but with wilder swings along the way. If you’re comfortable with short-term fluctuations in value, including occasional losses, choosing an option with a higher allocation to growth assets is a simple way to turbo-charge the growth in your balance.

Alternatively, perhaps coming closer to retirement means you are less comfortable with volatility and investing your super more conservatively would give you the confidence to add additional savings into your pot.

It is important to remember that retirement is not the end of the line for investing your super. It needs to last you for life, so growth assets still have an important role for most people as they approach and enter their retirement years.

2. Beware of investment fees

Unlike administration fees that are deducted directly from your account balance, investment fees in super can be less obvious and escape your notice. Investment fees cover the work of the fund’s asset management team who select the investments as well as the transaction costs associated with buying and selling assets.

These fees are usually considered before the investment return is calculated, so you don’t see any transactions coming out of your account. Instead, the fees reduce the investment return you receive.

You can check the fees for each of your fund’s investment options in their Product Disclosure Statement (PDS). There may also be a separate investment guide or fees and costs guide to refer to. If you have any difficulty finding the fees for all options, give your fund a call to find out where to look.

Investment fees can vary substantially, so shop around a few low-fee industry funds to make sure your chosen option is not too expensive in comparison to low-fee options with a similar asset allocation.

A simple way to minimise investment fees is to choose an indexed option. Rather than employing investment managers to select assets and try to ‘beat the market’, indexed options contain a representative sample of the entire index they are targeting. For example, an Australian share indexed option would usually represent the ASX 200 or ASX 300 index. Many super funds also offer diversified indexed options that cover indexes for Australian and international shares as well as listed property.

3. Take investing to the next level with member-directed choices

If you’re comfortable with investing and have built your knowledge, it could be time to investigate taking more control over your super assets.

Many large super funds give you the option to choose your own mix of shares, exchange traded funds (ETFs) and term deposits. These options have various names depending on the fund but are usually called something like ‘member direct’ or ‘direct investment’.

This can be an accessible way to make your own investment decisions without the need to open a self-managed super fund (SMSF).

As a bonus, if you stay with the same super fund through to retirement, you can transfer your assets from the accumulation phase to the tax-free retirement phase without any transaction costs or capital gains tax to pay.

To do this, you start a pension (income stream) for retirement, keeping the same investments with the same fund. Then, when you sell assets later to fund your withdrawals or just to select a new investment mix after starting your pension, the capital gains are tax free.

The downside is if you choose to move super funds you will need to sell your investments, realising any capital gains (and therefore paying tax), and incurring the transaction costs to sell. Think carefully and consider getting some financial advice before you grab the controls.

The bottom line

Whether you’re just starting to focus on your super or have been keenly building your investment for decades, following these tips can set you on track to make the most of what could be your best years of saving. Start small and follow the tips that make sense for you now.

Once you get started the next moves can feel simpler and our step-by-step guides can help you along the way.