It can be hard to know what the optimal amount of superannuation to aim for is, particularly in this day and age.
The Federal Government’s Superannuation Guarantee review has thrown a real spanner in the works, and there is constant chatter about regulatory changes and how liquidity can affect your retirement plans.
So, here’s a quick guide on how to get the optimal amount of superannuation in your retirement account as we enter 2020.
The ins and outs of superannuation
The nature of superannuation is that it’s very specific to your own circumstances, but however you choose to do it, getting your superannuation accounts in order is critical to your ability to retire comfortably.
Superannuation can be a great boost to your retirement savings, with the tax-advantaged status a particular bonus.
Options such as salary sacrificing super can be another option in your optimal superannuation strategy.
The obvious downsides to superannuation are the lock-up period and the potential for regulatory changes to affect your retirement.
It’s best to plan your long-term financial future with a qualified professional before making too many decisions.
How to find your optimal superannuation balance
Superannuation can be a powerful tool when used correctly by those looking to build a retirement fund. By investing money into super from a young age, you can let compounding returns boost your retirement nest-egg.
The key here is to not invest too much money into superannuation and over-fund your retirement. My personal view is that I want some money to spend now, so I can still invest in the likes of Vanguard Australian Shares Index ETF (ASX: VAS).
I’ve been able to find my optimal superannuation amount by working out how much I would like to spend in retirement. By adjusting for inflation and working backward, it’s easy to plot out my financial future based on tangible numbers.
Of course, everyone will have their own technique and know what works best for them, but ASIC’s MoneySmart offers a great starting tool.
The most important thing is to find your optimal superannuation number, and work backwards from there so you know what you need to achieve in 2020 and beyond.
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Motley Fool contributor Kenneth Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.