You’ve probably heard about superannuation, or super as most of us know it, and if you’ve had a job in Australia, chances are you’ve already got some tucked away. But how much do you know about how superannuation works?
If you’re counting on a comfortable retirement, your super may be more important than you realise. Let’s take a look at what super is, and how it can help you live more comfortably when you retire.
Understanding what superannuation is
Superannuation is a compulsory, long-term saving plan designed to help you prepare financially for retirement.
While you’re working, your employer is typically required to make contributions into your super fund equal to 9.5% of your salary. This is called the superannuation guarantee. Some employers, including the Queensland Government, may also make higher contributions to your super.
You (or your spouse) may also be able to make voluntary contributions to your account, or if you’re eligible the Government may add to it through the co-contributions scheme.
Generally, you’re not able to access your super until you turn 65, or reach your preservation age and retire. However there are situations where you can withdraw your super before you retire. You can read about getting early access to your super here.
Why is it important to have super?
After retirement, your income is likely to come from three sources;
- Government Age Pension
- Savings and investments
For most Australians, the Government Age Pension isn’t enough to fund a comfortable lifestyle after retirement. As much as we don’t like to think about it, bills and other expenses don’t stop just because we stop working.
This is where super comes in.
Your super is likely to be your main source of retirement income. If you have plans to travel or to simply take life a little easier, the sooner you understand how your finances will measure up, the better prepared you’ll be.
How does super work?
Super isn’t the same as other savings and investments. For a start, the Government encourages you to build up your balance by offering tax concessions for a majority of contributions types. It’s important to note that there are limits on the amount you can contribute to super and we encourage you to seek financial advice to make sure you don’t exceed the cap.
Money added to your super account (either from your employer or other contributions you make), is invested for you by your super fund. The earnings on these investments are then added to your account and accumulate over time.
You can decide how your super is invested by choosing an investment option. Or if you’d rather not make the decision yourself, most funds also offer a default option.
There are fees and costs that are deducted from your account. You can find out more about our fees here.
If you’d like to know more about making the most of your super, get in touch with us. You’ll be surprised the difference a five minute conversation can have on your future.