CASE STUDY: JOSIE CATCHES UP
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At 46, Josie is currently single with two children. With only $40,000 in super, she needs to build her super savings. Josie would like $400,000 in super by the time she retires. As a payroll officer Josie earns $50,000 a year, and her employer makes contributions of 9% of her salary ($4,500 a year) to her super on her behalf.
Age 46, Josie maximises her super by doing the following:
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She makes after-tax contributions of $397 a year, which makes her eligible for a partial Government Co-contribution of $397. Her super gets a total of $794 extra each year. |
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She also salary sacrifices $2,000 a year to turn $300 of tax into extra savings in her super. Her super gets a total of $2,494 extra each year. |
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She reviews her insurance to adequately cover her family’s costs of living |
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She reviews her investments. Because she plans to retire fully in 19 years, and wants to be adequately exposed to growth potential, Josie decides to stay with her default Balanced Growth investment option. |
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Age 55, Josie is closer to retirement. She realises she needs to contribute more to assist her in meeting her goal of $400,000.
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She reviews her investments. As Josie is close to retirement and wants a lower investment risk that still exposes her super to some growth, she chooses a Balanced investment option. |
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She salary sacrifices 10% of her pay ( that’s about $192 per fortnight or $5,000 per year). This gives her a total of $4,250 extra into her super without impacting greatly on her lifestyle. |
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* Uses 2010/11 tax rates, including the Medicare levy. ** $4,250 = ($5,000 salary sacrifice – $750 contributions tax) |
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By age 65, Josie has a net benefit of $416,090 in her super. She has met her super goal of $400,000. Her super is now freely available to her tax-free.
Please note: For the purposes of the Government Co-contribution, total income includes all assessable income for tax purposes (i.e. wages, share dividends etc., as well as reportable fringe benefits).
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