Tips to secure your financial future
What are your plans after you stop work? Maybe travel, pursuing a hobby or just taking it easy? Whatever you have in mind, these tips will help you achieve the future you want without the financial stress.
Take time to understand how your super fund works
If you think superannuation is too complex and boring to bother with – think again. Understanding how your super works can make a real difference to your future and retirement funds. As an operational employee of the Victorian Police you were fortunate to automatically join the ESSS Defined Benefit Fund. This can be a great advantage if you make the most of it.
Your fund is funded by State Government and because it’s a defined benefit fund it’s not impacted by the ups and downs of investment markets. There are no entry or exit fees for contributions. And you can choose the percentage of your salary you contribute within a set range.
Know how your benefit is calculated
Your super benefit is based on:
- your contribution rate, that is the percentage of your salary you contribute
- how long you are a member of the fund; and
- your final average salary when you retire.
To maximise your Benefit Multiple you can choose to contribute at the maximum contribution rate throughout your membership – which pays off as a multiple of your final average salary.
Check your contribution rate
Increasing your contribution rate is one of the simplest ways you can improve your lifestyle in retirement. You can choose to contribute between 3% and 7% of your salary before tax (or 3.6% up to 8.3% after tax). Contributing at the maximum rate is the quickest way to maximise your defined benefit. Whilst it’s never too late to start contributing, it pays to get in early. Members not contributing at the maximum rate can take advantage of ‘catch up’ rates.
How does working part-time affect you?
The quickest way to maximise your defined benefit is to work full-time uninterrupted for many years. But that’s not possible for all members. Working part time means your super contributions are prorated. So if you’re working 50% of full time (time fraction of 0.5), your contributions are 0.5 of your chosen contribution rate. To help you maximise your defined benefit, consider making contributions at a higher or the highest rate possible. You may also be eligible to contribute at a ‘catch up’ rate. Any increase in contribution rate for any period while you’re working will increase the rate at which your defined benefit grows.