pharmacy-no-rx.net http://healthsavy.com

Are you a superannuation guru? Do you know the ins and outs of your fund, its investments and how it rates performance wise each year? Or like many Australians, do you find the terminology confusing, get heart palpitations trying to make heads and tails of your statement and prefer to adopt the, ‘I’ll bury my head into the sand until I HAVE to figure it out’ approach?

If you’re nodding to not understanding the complex scope of superannuation, you’re not alone.

The truth is that many Australians feel disconnected from their superannuation. From how to choose a fund and what makes one fund better than another, to understanding how much you actually need to retire and how accessing your super works. The list of questions goes on and on.

To help get your head around it, we have put together some superannuation basics to help you lift the lid on your super.

 

So, what is superannuation and how does it work?

Superannuation is designed to be your primary, long-term retirement savings. When the time comes to put your feet up, it will hopefully give you the financial means to do so. Essentially how it works is your employer contributes an amount equal to 9.5% or more of your salary to your fund. This is then invested by your fund and providing it performs well, your balance grows. Fees are deducted to cover fund admin costs in addition to optional insurance if you decide to take it out.

 

What is the difference between funds?

When it comes to super funds, there are four types:

  • Industry super funds which are run to profit members;
  • Retail funds which are generally run by banks or insurance companies;
  • Corporate funds which are managed by your employer or company; and
  • Self-managed super funds (SMSFs) where you have control on how funds are invested.

 

How do I make a choice?

Choosing the right super fund is an important decision and for many Australians, one taken too lightly. Your choice could mean the difference between hundreds of thousands of extra dollars when you go to retire. So how do you work through the complex terminology and make a good choice?

  • Firstly, shop around. Just like when you’re buying a car, take the time to find out which funds have a good track record. Compare fees and investment choices, as well as coverage details for insurance should you opt to use it.
  • Consider the differences between a standard fund and a SMSF. If you would like full control of how your money is invested, are interested in choosing your investments or want a combined fund just with family and/or friends, a SMSF might be a great option.
  • Talk to someone who knows about superannuation funds. This is your future we are talking about and it pays to seek professional advice.

 

Do I take out insurance through my fund and how does this work?

Opting to utilise life and total and permanent disability (TPD) insurance through your superannuation fund is a convenient choice. When doing this, you have the option of paying for your premium monthly or annually. Paying annually will generally save you 7%.

Although accessing insurance through your fund is an easy option, you can also consider an alternative option. Sometimes it pays to compare policies to get the best deal.

Whatever your choice when it comes to insurance, if you can afford to pay your premium in an annual lump sum, it is worth considering. If you do, when you go to retire your balance will be higher, not just from the reduced premiums but also the growth of your investments on higher balances.

When changing or consolidating funds, it can be worthwhile to talk to a Financial Planner before you process any paperwork. Terms and conditions apply with your insurance and ensuring you understand the impact to your coverage is important.

 

How much do I need to retire?

The question that everyone planning for their retirement wants to know, how much will I need? Depending on your age, when you plan to retire and the type of retirement you want, this figure will vary.

According to the Association of Superannuation Funds of Australia’s Retirement Standard, if you are planning for a ‘comfortable’ retirement, you will need $545,000 in retirement savings if you are a single person and for couples, you will need $640,000.

 

Can I put more money into my super?

Yes, you can put more money into your super. You have the option to add concessional (pre-tax) or non-concessional (post-tax) contributions to your fund. Whether you deposit this yourself or access salary sacrifice, you can boost your balance outside of your employer contributions.

It is important to understand that annual caps do apply to contributions. For more information speak to your Accountant or Financial Planner, or visit the Australian Taxation Office website.

 

Transition to retirement, what’s that all about?

In superannuation terms, transition to retirement (TTR) means reducing your working hours while drawing on some of your superannuation benefits to supplement your salary. This can be a good fit for soon-to-be retirees who are not ready to give up work altogether and want to maintain their lifestyle. Terms and conditions do apply, so make sure you seek professional advice.

 

When can I access my super?

Depending on the year you were born, you will need to be between 55 and 60 years of age to access your super tax free. Once you reach this age, you can opt to withdraw your super in a lump sum, get paid a regular income or have a mix of both.

Depending on your circumstances, you may be able to access your super earlier if you are suffering severe financial hardship. Chat to a professional for information about terms and conditions.

 

Just like any big purchase, it can help to speak to someone about how to approach your superannuation. From choosing a fund to best suit your needs to understanding the ins and outs of consolidating your superannuation, whether or not to make additional contributions and how to make a plan when retirement approaches, an Accountant or Financial Planner can help make planning for your future, stress-free. Who knows, it could be the best investment you ever make.

 

Need some help? Chat to your Accountant or Financial Planner, or alternatively contact us on (07) 4632 1966 or mail@mcconachiestedman.com.au.

 

GENERAL ADVICE WARNING | This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial advisor before making any financial decisions.