40 is the new 50

• $50,000 per person, per financial year.
• $100,000 per person, per financial year if aged 50 or over at any time in the financial year.

Contributions caps 2009–2010 and ongoing

• $25,000 per person, per financial year
• $50,000 per person, per financial year if aged 50 or over at any time in the financial year.
  The transitional period ends on 30 June 2012.

But most of us still want to reach our savings goals for a comfortable retirement.  What can you do?
In some ways, saving  for retirement is like a board game.  Players know that when they reach the finish line (retirement), they will get the best result if most of their tokens are in superannuation, as the income from superannuation is tax-free (for now, at least).  The challenge is:  how to accumulate enough tokens to fund the income you want in retirement, from the most tax effective source? 
The most important thing is to accumulate enough, not whether you accumulate it in super or not.
 Let’s look at the issue in 3 parts.

Challenge 1:   Start saving now. The government changes have made 40 the new 50; that is, to make the most of the opportunity to put money into tax efficient super, you now need to start a lot earlier (starting at 30 is better than 40, and 20 would be even better).  What stops most 40 year olds from contributing to super is other priorities, like paying off the mortgage and paying school fees.  They put off saving until after these commitments are largely extinguished.  This means they miss the opportunity to get as many ‘tokens’ into super.    They also miss out on the power of compound income on investments.  But there are ways to address this.

Challenge 2:   Use other investment opportunities as well as super.   If you do not have sufficient income in retirement, will your main concern be whether that insufficient income is tax free or not?   Just because the government has narrowed the opportunity to put money into super, you can still accumulate investments to help fund an income in retirement. 

Challenge 3:  Take a strategic approach to your total financial goals, not just super.  Just as many diets fail because you are not allowed to have your favourite foods, no financial plan will work unless it accommodates your day-to-day lifestyle spending needs.  If you need to manage your money effectively in order to set some aside for a later date, you need a strategy that allows you to spend on the things that matter (within reason) right now. 
So how can you start saving now, make the most of all available investments, and still have money to fund a reasonable lifestyle?

The answer lies in a comprehensive financial plan.   If you are willing to start saving now, your adviser can assist you to create surplus cash flow by reducing tax and creating additional income streams from investments.  The surplus cash flow can be applied to reducing debt.  This lets you achieve 2 goals:  accumulating more wealth in investments to fund your future retirement, and reducing debt and interest costs.

Talk to your financial adviser about making the most of your time and money:  if 40 is the new 50, it’s not a moment too soon.