Wednesday, 5 March 2008

First 2008 Goal Achieved – Check!

I took the plunge and increased my pre-tax superannuation (retirement for the non-Aussies) contributions to 3% today, checking off one of my 2008 financial goals.

This means I now have a total of 11% of my salary going into superannuation, once the governments 9% superannuation guarantee amount is factored in as well.

This may seem a controversial decision for some, as I’m still carrying such a high debt load, but I’m single, almost 39, and rent. I need to start looking out for my future today, to maximise any compound interest benefits I can while they can still make a difference. Even waiting 2-3 more years will make a big difference at this point in my life, so I’m going for it.

As the money is coming out pre-tax, it doesn't have a have a huge impact on my life today, however every bit will help at the retirement end of things. I wasn't aware we had a ceiling on the pre-tax contributions you can make to your super, but as of July 2008 it’s $50,000 (indexed) into your super account each year, to take advantage of the lower tax rate on retirement savings. Anything over that is taxed at 31%.

I guess that’s why I had no idea; I’m not even close to contributing that amount, even at the higher 3%!

In reading around the blogosphere about retirement options, plonkee's post on planning for retirement really struck a chord with me. It was short, sharp and to the point, and definitely worth a read. I’m glad to know I’m following those three steps myself.

It also seems louise at My Journey To Eliminate Debt is also looking to boost her retirement savings, and Matt at Frugalize just used his annual pay rise to boost his; a really smart idea if you’re living comfortably at your current income.

Do you actively contribute to your retirement funds pre or post tax? Or at all?

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10 comments:

  1. Hi dd, I think its a good decision. You're right to start thinking about your future today.
    :)

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  2. I think so too, most people say to pay off all debt first, but I can;t afford to wait that long.

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  3. Hi dd, I tried to post yesterday but blogger was not co-operating with me! it's such a good deal the salary sacrifice, we'd be mad not to take it.
    I have upped my contribution, I think saving for retirement is still smart when reducing debt, all that compound interest and the tax savings :)

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  4. thanks louise, I agree about the salary sacrifice, we should go for it as soon as we can to make the most of it.

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  5. Other than my compulsory National Insurance contributions I really don't have anything set aside in the way of pension. Being self employed means the ball is in my court to get it all set up myself and I really don't have a clue as what is would be the best choice for me.
    I am working on filling some ISA's (UK tax free saving accounts) but am not sure if I should tie myself to an Stakeholder Pension or not. Are they any good in the long run?
    Like you DD I am not getting any younger and really should settle the issue once and for all.

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  6. This is such a smart move, especially for someone in your situation (young, single and no mortgage). Currently, we are using the magic of compounding interest the opposite way by trying to pay off our mortgage as quickly as possible by making significant contribution at the start of the loan period. Otherwise, we would also be topping up our super as well.

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  7. hi dd how are you going?

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  8. Great work....you are on the right track. Pre-tax savings are worth twice their weight thanks to the tax benefits and compounding effects.

    Cheers,
    Andy.

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  9. I save a large % of my income for retirement. I figure if I am "saving too much" then I can decrease my contributions when I get closer to retirement.

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