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TRANSITIONAL LIMITS

TAKE ADVANTAGE OF HIGHER LIMITS IF YOU’RE OVER 50

See how Robert, 58, can take advantage of higher contribution limits to boost his retirement savings.

While concessional contribution limits have been reduced, if you’re over 50 you still have the opportunity to take advantage of the higher $50,000 limit until 30 June, 2012. You may also have access to the higher limit after 2010 if your balance is less than $50,000. Taking advantage of the higher limit while it is here could increase the power of your super savings.

Let’s look at Robert and Jane. Robert makes sure the total concessional contribution to his super is $50,000 for each of the three years to 30 June 2012, while Jane contributes $25,000 per year for six years.

At the end of the six year period, Robert has accumulated $148,000 from his original 3 years of saving together with investment earnings. Jane has $142,000 even though she contributed exactly the same total amount. That’s a difference of $6,000, even if Robert makes no contributions at all in the last three years.

This shows taking advantage of the more generous contribution limit currently available can be a great way to boost your retirement savings and reduce the impact of needing to comply with a lower limit in future years.

 

Assumptions:
1. For ease of illustration and to show figures which are in “today’s dollars”, inflation has been assumed to be nil.
2. A constant ‘real’ investment return. (ie investment return above inflation) of 3% pa has been assumed. Actual investment returns can fluctuate significantly from year to year and the degree of variability in returns will affect the outcome of these scenarios.
3. The contributions are assumed to be “concessional” contributions (ie employer or salary sacrifice and contributions tax of 15% has been deducted).