Super confused? Lifting the lid off your superannuation.
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 good news is, we can help! Not only have we put together some answers to the most common superannuation questions below BUT we are also offering a FREE consultation to help you get your head around your superannuation and start planning for your retirement – whenever that might be.
Chatting to an expert is easy, simply complete the form to the right, call us on (07) 4632 1966 or send us an email to firstname.lastname@example.org.
What’s got you super confused? Your common superannuation questions answered
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 choose and should I consolidate?
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 Self-Managed Superannuation Fund (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.
When it comes to consolidating your super, it pays to do your homework. Although there are good reasons to streamline your funds into one account, you also need to be aware of the pitfalls. You need to base your decision on your individual situation and make an informed decision.
Reasons to consolidate:
- Easier to keep track of how much super you have and how it’s performing, and to update your contact details.
- You only pay one set of fees.
- Less paperwork.
Reasons to consider having multiple funds:
- You may lose insurance benefits not covered by another fund. Waiting periods with a new fund may also apply.
- Exit fees may apply.
There are also instances where it isn’t possible to transfer funds from one account or another. For example, if you are in a defined benefit fund.
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 you 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 top up my own super and how do I do it?
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. Depending on which option you choose, will depend whether you do this through your employer or directly through your super fund.
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.
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.