For many Australians there superannuation fund is the single biggest investment they will make in their lifetime. You would think it would be a little bit more exciting and interesting to look at, but having that money locked away until retirement has this incredible ability to make thousands and thousands of dollars look boring and uninteresting. So here’s the quick rundown on superannuation.
Your superannuation is actually like a big trust fund. Someone else holds on to the money, does what you tell them to do and when the right conditions are met that money will be released to you. Due to this structure and the fact that you’re saving to become a self-funded retiree, the government gives you a concessional rate of tax (15%) on contributions and earnings (as long as you keep your contributions under the cap).
Super forms one leg of a three-legged stool called retirement income. The other two legs are the Age Pension and your personal savings and investments. Between these three legs, you need to have enough money to last your retirement, which may be 30+ years. When you consider how long you may have to survive without a job, it becomes clear that you need to make sure you have enough retirement savings to last.
Superannuation is largely portable. There are only a few circumstances where it’s in your best interest to change from one fund to another. The vast majority of employers will let you choose your own fund which means you can take your fund with you wherever you work.
One of the biggest advantages of a super fund is that you can pay for some of your life insurance through it. This allows you to get the cover you need, without having to make big budgetary sacrifices. Yes, it will eat away at your retirement savings, but with some good financial planning you can make sure that you put this money back in over time and accumulate assets outside of super as well.
When picking a super fund there’s a bunch of considerations to take into account. Investment performance, beneficiary nomination options, cost of life insurance, investment options, customer service, the cost of your investment options, online access, clear reporting, administration fees etc. It can be a bit of a minefield to make sure you’ve got the right fund but get it right the first time and you shouldn’t have to do it again (and yes, this is a service we provide).
The bottom line is that you’re not going to work forever, the earlier you take an interest in your paying for your retirement, the better off you’ll be. Whether your saving through super or accumulating outside of super is entirely up to you, but don’t squander what you have because you haven’t consider the future.