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Why you can never have too much super

Even for the most astute investor, there’s always the question of how much is too much super.

Superannuation exists to help reduce the burden on the social security and pension system in the future. By locking away 9.50% per year of employees’ wages for their retirement, Australia should have more self-funded retirees.

We all know that superannuation accounts are tax-advantaged, but is there such a thing as too much super?

Why you can never have too much super

Concessional contributions to superannuation are only taxed at 15%. That’s a potentially huge benefit given your marginal tax rate could be as high as 47%.

By investing inside of super, you effectively receive an instant return on investment (ROI) compared to investing your after-tax dollars outside of super.

So, I think there’s no such thing as too much super and maxing out my concessional contributions before investing outside of super is a good idea.

Before you go buying shares for retirement like Commonwealth Bank of Australia (ASX: CBA) or Telstra Corporation Ltd (ASX: TLS), consider where you’ll buy them.

I personally think it is a no-brainer to receive an instant advantage if you’re earmarking funds for your retirement regardless.

When super may not be the best investment vehicle

While I do believe you can never have too much super, it isn’t always the best option for everyone.

Super is subject to significant regulatory and liquidity risks. The Federal Government could be tempted to dip into the honey pot of superannuation and extend the preservation age or change taxes.

Similarly, your money is locked away for a long time with super. If you’re a young worker, it can be hard to know what the future holds.

If you want to retire early, you may not want to have too much super. Early retirees will want to be able to access their investments earlier than usual.

Foolish takeaway

There’s no real downside to having superannuation waiting for you, particularly given the tax advantages.

While it may not be absolutely optimal to put more into your super, I don’t think there’s such a thing as “too much”.

Here are 3 top-quality ASX dividend shares that I think are worth considering for a self-managed super fund.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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.

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