The Power of Salary Sacrifice into Super
- Michael Sauer
- 2 days ago
- 2 min read
$357,000 - that’s the potential amount of extra money you could have in super, just by salary sacrificing 10% of your salary from age 50!
This scenario assumes a starting balance of $400,000 at age 50. The client is earning $150,000 p.a. indexed at 5%, and retires at age 65. Estimated net super return after fees are 6.6% p.a.
The beauty of this strategy, is that over the duration you have only sacrificed $180,000 of take home pay to get an extra $357,000 to retire!
So where does the extra $177,000 of free money coming from? Well, this strategy provides two big benefits:
Overall tax is reduced as super contributions are taxed at only 15% p.a.
The investments in super are able to provide generous returns which and have a long time period to benefit from compounding returns, in a low tax rate environment.
You may think that salary sacrificing 10% is too much for your budget, but let's take a closer look at how much this affects take home pay.
For this client example, salary sacrificing 10% of their $150,000 p.a. salary, their net take home pay would not reduce by $15,000 but rather $9,150 = $15,000 salary sacrifice - their marginal tax rate of 39% or $5,850.
As you can see salary sacrifice can be one of the most powerful wealth building strategies! If you would like to know whether this strategy would work best for your wider Financial Planning you can:
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