For most people, superannuation (super) begins when you start work, and your employer pays money into a super account for you. The minimum employers are required to pay – the ‘super guarantee’ (SG) – currently sits at 10 per cent of your ordinary time earnings and will gradually rise over the years (i).
Moreover, you can choose to contribute additional funds to your super through salary sacrifice and personal contributions. Your super fund invests the money, and it is locked away until you retire from work after age 60. There are acceptable reasons for accessing your super before this time, such as compassionate grounds or purchasing your first home (under the FHSS).
Of course, this can be an incredible lifeline in a time of need. However, this decision should not be taken lightly as taking money out of your super will affect your super balance and may affect your retirement income. Speak with a professional to understand what it would mean for you.
How much might you need in retirement? Find out with our Retirement Needs Calculator.
Super is simply a way of saving money while you are working. As shown below, funds (your money) pour into your retirement bucket through pre-tax and after-tax contributions, and small amounts leak out through fees, taxes and insurance premiums (again, your money). The bucket is locked away until you retire on or after age 60, at which point you can access your super fund pension or lump sum without paying tax. The trick is to maximise the funds in your bucket through consistent contributions (legally required while working, check!) and tailoring your fund to your circumstances through investment choice and insurance levels.
Below, we take a deep dive into the latter. That is, choosing and tailoring your super fund. But if you are planning on taking a career break, or you’re currently on one, you could be missing out on regular income and regular super contributions. While there are often many money matters to balance while on a career break, it might be a good idea to put some plans in place to ensure your super keeps working for you while you are off work. Moreover, you could look at ways to grow your super later in life.
Not sure if your super fund is right for you? Get in touch.
Most people can choose a super fund to have their employer make contributions and additional personal contributions. If you don’t select a fund, your employer will pay into a default MySuper account. Therefore, you may have a super account even if you don’t know about it or indeed multiple accounts.
Many employers offer great incentives within their company fund, such as lower fees and insurance premiums and insurance granted without medical history requirements. However, your employer is under no obligation to choose a fund that’s in your best interest (ii). Therefore, you must decide whether their default system is appropriate for you.
Have a look at what your new employer has to offer and compare. Don’t get lazy!
Moreover, default systems often lead to people having multiple accounts. This commonly happens when you change jobs. Every time you open a new super account and start making contributions, any retirement savings in your old account may be eroded by unnecessary fees and insurance premiums (ii). However, this is not always the case.
Depending on your circumstances, holding two accounts may lead to better benefits. For example, your old account may offer mega-cheap insurances, while your new fund may offer better investment options. Rather than losing important cover, you may choose to keep both.
Consider what you’re trying to build into your super. You can tailor your fund to suit your circumstances, such as your investment strategy or levels of insurance.
Check out our Calculators and Tools to help in your investigations.
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What you need to know
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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