Whether you are a just starting your career or are in the last years of it a Super in Australia should be a priority for your financial health and well-being. The best part is that since a Super retirement fund is part of the legislation in Australia mandating that employers must pay into it, it is easy to accumulate funds for your retirement.
The Super Explained
An Australian superannuation is a retirement fund that accumulates funds by direct employer contribution into it at a rate currently set at 9.5%. This rate will be increasing to 12% in the coming years and you can even top up this account yourself, further increasing the funds that become available to you in your retirement years. As a lifetime investment opportunity, ensuring it is maintained is of utmost importance to your retirement.
As a legislated fund, all employers are required to by law to contribute to these accounts. These accounts are meant to provide a nest egg of financial security when you get older. Since 1992 when the Superannuation Guarantee was passed by the Australian government these accounts have been accumulating money for Australians.
Setting up a Super
When you start your first job your employer is responsible for setting up your Super account. Most employers automatically choose which fund your super is placed in, but you still have the power to decide by filing a Standard Choice Form with your employer available from the Australian Taxation Office (ATO). As not all super funds are the same, it is best to do some research into these accounts before settling for an account. These funds have different fee structures, investment options that range from bonds to stocks, different extra benefits and performance differences.
Settling for an employer-chosen Super could mean a huge disadvantage for your long-term growth of the Super as well as lower benefits and potentially higher fees. Even if you have been put into the ‘default’ fund by your employer, at any time you can request to change funds. However, you can only change funds with your employer once per year.
As a Super’s contributions are limited to only 9.5% of your annual earnings before overtime but including certain benefits, your actual contributions may not be enough. If you earn $30,000, your annual contributions will only be $2850. However, you can supplement these contributions with extra contributions. You can boost your super savings in a number of ways including putting part of your savings into your super account, asking your employer to increase your super contributions, or transferring super from another fund account into your main super account.
In this super account, you can choose how the money is invested. Whether you want a principle safe investment such as guaranteed investments from a bank or want it tied to the market by investing in funds and stocks. With a market-tied super, it will rise and fall based on market performance giving you a larger up-side reward but also more risk. The best part about the super as well is that for most people its contributions are taxed at a lower rate than your normal earnings.
The flexibility of a super is great during its lifetime and when you need it in retirement. You can withdraw funds from your super as a lump sum as an income stream or a combination of both allowing you full financial control over the money upon retirement. A financial advice of Supers is provided by many financial companies throughout Australia.