The Downsizer Contribution
The downsizer contribution is a government initiative that allows individuals aged 55 and over to contribute proceeds from the sale of their home into their superannuation. Here’s how it works:
- Eligibility: To be eligible, you must be aged 55 or older and have owned the property for at least 10 years.
- Contribution Limits: You can contribute up to $300,000 per person ($600,000 per couple) from the sale proceeds of your home.
- Non-Concessional Contribution: The downsizer contribution does not count towards your non-concessional contribution cap, giving you more room to make additional contributions.
How to Utilise the Downsizer Contribution
Despite the name you don’t have to downsize your home to take advantage of this opportunity. However, with the costs involved in a property transaction resizing your home for the next era in life often makes sense.
- Selling Your Home: If you’re considering selling your home, this scheme can be a great way to boost your superannuation balance. Selling a larger home and moving to a smaller, property can give you the opportunity to free up capital.
- Maximising Contributions: By contributing the maximum allowed amount through the downsizer contribution, you can significantly enhance your retirement savings. For example, a couple could add up to $600,000 to their superannuation.
- Strategic Planning: Combining the downsizer contribution with other strategies like salary sacrifice or personal contributions can further optimise your retirement savings.
Steps to Implementing a Superannuation Top-Up Strategy
- Review Your Financial Plan: Start by reviewing your current financial situation and retirement goals. This will help you determine how much you need to save and identify areas where you can make additional contributions.
- Consider Salary Sacrifice: Talk to your employer about salary sacrificing part of your income into your superannuation. This can be a tax-effective way to boost your retirement savings.
- Make Personal Contributions: In addition to salary sacrifice, consider making after-tax personal contributions to your super. These contributions may also be eligible for a government co-contribution if you meet certain criteria.
- Utilise the Downsizer Contribution: If you’re eligible, plan the sale of your home strategically to take full advantage of the downsizer contribution.
- Monitor and Adjust: Regularly review your superannuation balance and adjust your contributions as needed. Keep an eye on any changes in legislation that may affect your superannuation strategy.
Case Study: Jane and John’s Journey to Financial Independence
Jane and John (not their real names) are a couple in their late 50s who came to us for advice. They were planning on selling their family home and moving into a smaller abode out of the city. By utilising the downsizer contribution plus other financial resources, they were able to add the full $600,000 to their superannuation balance. Additionally, we advised them to implement salary sacrifice arrangements with their employers, further boosting their retirement savings.
With their enhanced superannuation balances, Jane and John now have greater financial security and flexibility in their retirement years. They can enjoy their retirement without worrying about running out of money, thanks to strategic planning and an appropriate investment strategy.
Final Thoughts
Topping up your superannuation can be a powerful strategy for pre-retirees in Australia looking to secure their financial independence. By taking advantage of various options like the downsizer contribution and making additional contributions through salary sacrifice or personal savings, you can significantly boost your retirement savings.
Remember, every individual’s financial situation is unique. It’s essential to consult with a financial planner to develop a personalised financial plan that aligns with your goals. Start today and take control of your financial future.
If you have any questions or need assistance with your financial planning, feel free to contact us. We’re here to help you achieve your retirement dreams!
By focusing on these strategies, you’ll be well on your way to a more secure and comfortable retirement. Happy planning!
Disclaimer: This may contain general advice. It does not take account of your objectives, financial situation or needs. You should talk to a financial adviser before making a financial decision. This has been prepared by Dollar Growth Financial Advice Pty. Ltd. refer to the Financial Services Guide for details. While care has been taken in the preparation of this, no liability is accepted by Dollar Growth Financial Advice Pty. Ltd., its related entities, agents, representatives, employees for any loss arising from reliance on the information contained herein.
