Adding more to your retirement savings: is it worth it?

There’s no denying that being proactive with your super may be key to increasing your retirement savings.

As an investment vehicle, super can offer significant benefits thanks to the magic of compounding interest. It also provides one of the best tax structures available.

Why super offers much promise for retirement saving

Adding more into super is not only a good way to invest your income, it also helps your retirement savings grow so that when you do retire, your money will still be worth something.

Depending on your income and how much you can afford to contribute, adding more into your super may be a decision that could benefit you in retirement.

Why? It boils down to two key things.

Magic of compound interest

The first, is the magic of compounding interest – the process of earning interest on your interest and so on.

For example, if you invested $10,000 at 5 per cent per year, each year you would earn $500 in simple interest. However, when you add in the magic of compounding and allow the $500 interest earned in the first year to be added to your account balance, then repeated each year during the 5-year period, after 5 years you would have earned a total of approximately $2,762 in interest (compared to $2,500 in interest after 5 years using simple interest). This would give you a total of $12,762 after 5 years.

But that’s not all.

One of the best tax structures available

From a tax point of view, super can be incredibly powerful.

By making extra contributions to your super fund using your pre-tax income, up to the current annual contribution cap of $27,5001 (2021/22), you could benefit from those contributions being taxed at just 15 per cent.2 This is potentially a lot less than the personal tax you would pay on your income.

If your spouse is a low-income earner, there are tax benefits you could gain too for making a contribution to their super.

But like most good things, super is not without its drawbacks.

Limitations of super for retirement saving

Super does have some limitations as an investment vehicle. For instance, you can only make up to $27,5001 in super contributions before-tax in the 2021/22 financial year (this amount includes your employer’s contribution of 10 per cent of your salary) or up to $110,000 in after-tax contributions3 in a financial year. You may be liable for more tax if you exceed these limits.

There are also limitations on when you can access your super.

Get support

Planning for your retirement can be a complex and a challenging area to get your head around.

So if you’re keen to supercharge your retirement savings, but aren’t sure how to go about it, then speaking to a financial adviser can be a good way to go.

Bottom line: Being proactive with your super will likely make a significant difference to the size of your final nest egg. 

Next: Making the most of your retirement finances

1 You may have a higher concessional contributions cap if you have previous unused concessional cap amounts – for more information: Australian Taxation Office:
2 An additional 15% tax may apply to higher income earners - ASIC Money Smart:
3 ASIC Money Smart:

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The article was prepared by Bryan Ashenden, Head of Financial Literacy and Advocacy at BT and is current as at 1 July 2021.
 BT - Part of Westpac Banking Corporation.
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. Any tax considerations outlined in this publication are general statements, based on an interpretation of the current tax law, and do not constitute tax advice.  The tax implications of super investments can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.