Super at every stage – 45 to 55

SMSF technical expert and columnist for The Australian newspaper
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Key points

  • Work out a retirement plan. Do a budget to work out how much you’ll need to live on.
  • Review your investment option to make sure you’re getting enough growth out of your super.
  • Make lump sum contributions where possible and take advantage of spouse contribution limits.


During your mid forties and early fifties, your superannuation balance will become more and more important as it’s during this time that people really start getting serious about their retirement savings.

There are some great gains to be made from starting early, check out our article from last week here. Once you’re on top of all those action points, read on to find out what you should be focussing on from your mid forties to mid fifties.

1) Work out a retirement plan

You’re now at least half way through your life. Now is a good time to begin thinking about how much longer you would like to work.

Making sure you’ve got a watertight budget is important at any stage but even more critical as you get older. Why? Firstly, a budget allows you to work out if you can make some slight adjustments to your spending patterns and put aside more of what you earn for your superannuation fund. Secondly, a budget gives you some idea about how much your lifestyle costs. You can use this as a guide for how much income you will need in retirement, which in turn helps you work out how much money you need to retire.

2) Where’s your super invested?

The media, and financial planning “gurus”, often say that as you approach retirement you need to reduce exposure to shares. What they don’t often tell you is that the dividends from Australian shares have increased faster than the inflation rate for more than 30 years.

You need to be regularly reviewing where your super money is invested.

Even if you’ve hit 50, you still have a long life ahead of you – increased life expectancies mean there’s a very good chance you’ll still be an investor for another 35 and 45 years. Yes – you’re a long-term investor!

Your super fund will offer a range of investment options. These could be single sector options – e.g. all cash or all Australian shares – but most are a blend of growth (shares and property) and defensive (cash and fixed income) assets.

A high growth option will have more allocated to shares – sometimes close to 100% and a defensive option will have the majority in cash or cash-like assets.

If you don’t make any choice (and aren’t a member of an SMSF), you will be in your super fund’s default MySuper option. These funds usually have a split between growth and defensive assets of around 70/30 so if that’s too defensive, think about changing it to a growth option.

3) How much do you have and what can you do with it?

If you’re in your mid forties and started full-time work early, and have been able to salary sacrifice, you might be surprised by how much you’ve amassed in superannuation. You may even want to consider an SMSF.

This makes sense if you want to control where and how your money is invested and it makes economic sense to run a fund. You need to work out the cost of starting and running an SMSF to see if this is less than your current arrangements. For years ASIC has said that you often need about $200,000 in an SMSF to make it good value for money.

A report last year by Rice Warner for ASIC on the costs of SMSFs found that you needed $200,000 in an SMSF for it to be cheaper than industry and retail funds, but the trustees also needed to undertake some of the administration tasks.

4) Lump sums contributions

These years are also the years in which you may come into large sums of money, such as inheritances from elderly relatives. It’s a good time to make a lump-sum contribution to super and while the days of Peter Costello’s one-off $1 million limit are long gone, you can still contribute up to your maximum concessional contribution limits, which have recently been increased to $30,000 and $35,000 if you were 49 or over on 30 June, 2014.

Each year you can also contribute $180,000 in non-concessional contributions. The three year bring forward rule allows you to contribute $540,000 in one go.

Also take advantage of spouse contributions. If your spouse only works sporadically or earns a very modest income (less than $13,800 each financial year) you can contribute to their super fund and receive a modest tax break.

With Penny Pryor

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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