Don’t be shocked by the lovely holiday snap at the top of this article. I thought I would include it as a bit of motivational material to get more involved in our Superannuation future!
Superannuation is a complex beast but in this article I’ll try to do my best to convince you that it is worthwhile to consistently add to your account and to start as soon as possible. “Oh, but I’m too young I hear you say, I’ll get around to it some day”. Please take advice from someone who has learnt by their own mistakes. I’m in my fifties and have lived a full life with plenty of action but have been a bit blasé myself about my Super. I have a modest amount but by no means anywhere near the amount I should have for my age. “Oh it’s ok’, I said to myself – I’ll catch up.
If your now in your twenties to forties please take some very, very good advice. Don’t have the attitude that “I’m alright Jack – I’ll do it later”. Do it now! After reading this article please consider investigating Superannuation and try to put as much money into your account as you can.
Do you have enough?
I think most peoples answer to this question will be “probably not”. Most Australians don’t have enough Super for their retirement and many people also don’t know how much money they should have for a comfortable retirement. I also heard on the radio recently that 70% of superannuation holders have decisions made for them by someone else and that a 50 year old could be $15,000 worse off in 10 years because of fees. I think this is a timely reminder to be more involved in your own affairs and SHOP AROUND! You can move Super funds quite easily, all you need to do is the paperwork.
3 reasons Super is a good idea!
1. Superannuation has been set up by the Government to fund families retirements. Why is this great? You don’t have to make a decision- the decision has been made for you by Government legislation and it means one less decision you have to make. I call it “mandated savings” because you don’t have to be motivated to make the decision about Super. Your only decision is which fund to put your Super in or whether you just go with the fund your employer is aligned with.
2. Your boss contributes 9% of your wages to Super every week into a Superannuation fund where it will accumulate for your retirement. You don’t have a choice it’s just forced savings.
3. Tax concessions are available from Super which make it a very attractive form of forced savings. They can become a little complex in some situations but I’ll give you the basics.
Tax rates are presently as follows (I’ll keep it to the rates that cover the majority) –
37,001 – 80,000=$3,572 plus 37c for each $1 over $37,000.
80,001-180,000=$17,547 plus 45c for each $1 over $80,000.
This means that someone earning under $80,000 is paying 37c tax on more than half of their wage and also 37c on every dollar earned if investing. If you have money, say in a managed investment fund outside Super, you pay 37c on every dollar earned as well as any interest you have in savings accounts.
Alternatively Superannuation earnings are charged a 15% tax, so that’s 1/2 of the tax you’ll pay if you earn under $80,000, or 1/3 if you earn over $80,000. This 15% is on all contributions by your employer, 15% on all earnings within the Super fund and 10% capital gains tax if any assets are sold.
What you you rather 37c to 45c in the dollar, or 15c tax? Sounds attractive doesn’t it?
Superannuation is complex as I’ve already mentioned so this article I have kept it simple for you. For instance, pre tax contributions to Super are capped at $25,000 ( that includes your employers contributions and any salary sacrifice you may add) but if your over 50 it increases to $50,000.
Once you start contributing to your Super (hopefully when your younger) you don’t really need to worry much about the complexities. It’s when your approaching your 50’s and retirement age of 60 and over that things can become more complex. Then I would suggest researching on Google or the Australian Tax Office website for information or looking for a financial advisor (preferably a fee for service one) that can help you.
I have included a link to Superannuation Calculators that can also be found at Free Calculators menu at top of our Home Page.
I hope this has helped. I will add other articles soon on choices and types of Super funds.