How to become a superannuation millionaire

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BECOMING a superannuation millionaire is not as impossible as many people might think.

Planned new rule changes will add some flexibility for savers but also take some away, and super specialists say its more important than ever to use the system to your advantage.

Despite uncertainty over proposed changes and extra confusion caused by the current election mess, supers low taxes mean it remains a great structure to hold assets before and during retirement.

Club Plus Super CEO Paul Cahill says holding a million dollars in super is not inconceivable. It can be boosted by extra regular contributions spread over many decades, selling an investment property and pumping the profits into super, or combining couples funds.

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The power of compound interest can grow a $100 weekly deposit into more than $1.2 million over a typical working lifetime.

If they work for 45 years, they are going to find they get very close to millionaire status if they do it correctly, Cahill says.

We often forget that for most people when they retire, there isnt one nest egg hatching but two. Speak to your fund about the rules and incentives that exist for partners.

Wealth On Track principal Steve Greatrex says it can be a good idea for couples to use each others contributions caps, particularly amid government plans to lower the limit on tax-deductible contributions such as salary sacrifice and employer payments to $25,000 a year.

I think people will have to start thinking about salary sacrifice earlier and more often, he says.

Its going to be harder to catch up now with the lower caps.

A divided federal Parliament increases the chances that the cut to the cap will not be legislated. Other positive changes such as allowing older Australians to contribute, allowing people to make limited catch-up contributions, and allowing personal tax deductions for anyone who pumps money into super are more likely to get the go-ahead.

Greatrex says while some of the new flexible measures will be useful, they will not offset the negative impact of the proposed lower contribution caps.

Cahill says depositing $25,000 into super each year sounds good in theory but people in their 20s or 30s are unlikely to do this. But $25,000 for a 50-year-old they can often put in the whole lot and then some.

The 45-50 bracket is when people switch onto super.

The key is to get good advice and structure your savings correctly, Cahill says.

If people want to get to millionaire status they have to use the system to their advantage.

There is a common perception that super isnt real money because it isnt immediately accessible, but the reality is that Australians are living longer than ever before and the money you have in your super fund will feel very real when youve stopped working and its yours to do with as you wish.