Over the past decade, Australian millennials like yourself have been getting involved with superannuation. From 2007 to 2017, millennials’ share of super fund balances doubled from 6.4 per cent to 14.6 per cent, according to Roy Morgan. That said, McCrindle reports that millennials account for over one-third of the Australian workforce – so there’s still further to go.
If you’re new to the idea of superannuation, it can be an overwhelming yet important topic to tackle. To help you understand where you stand, read on below where we cover all the basics of Australian super.
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What’s superannuation good for?
Superannuation is a system designed to help Australians save for retirement. It’s tax-effective and strictly enforced, meaning any money that goes into your super fund is taxed at a lower rate than your regular income and is generally locked down until you satisfy release conditions (usually reaching preservation age and retiring).
In short, superannuation is good for:
- Saving: Because your super balance is more or less inaccessible until retirement, you’re forced to save and protect your future. Also, your employer is required to pay 9.5 per cent of your ordinary time earnings to your fund as a “super guarantee” (SG). Super may also help you save for a house by way of the First Home Super Saver (FHSS) scheme.
- Investing: Money in your super is invested on your behalf by professional fund managers, so it accrues interest to grow your savings faster. Understanding super is also a great way to get your head wrapped around investing, should you later want to take up private investments.
- Insurance: Most super funds offer life insurance, total and permanent disability cover and income protection. So, if you have a super account, you probably have basic insurance cover for any worst-case scenario.
- Tax relief: A number of tax concessions can be taken advantage of to grow your nest egg without losing much to tax.
With your savings in super, you can spend more at the moment and rest assured your future is protected.
How to pick the best super fund for you
Most people can choose a superannuation fund to have their employer make super guarantee and optional salary sacrifice contributions into. If you don’t select a fund, your employer will pay into a default MySuper account. Therefore, it’s possible you have a super account even if you don’t know about it.
If you’d like to choose your own super fund, you can do this at any time, but can only change once per year. When picking a super fund, you should investigate:
- Fees: Be sure to understand what you’ll pay out of your super in fees, such as administration and advice charges. Remember to check if your current fund enforces an exit fee.
- Performance: Look for consistent performance – consider a fund that’s done well over the last five years, not just last year’s top performer.
- Investments: As a younger person, you may be more comfortable with higher risk investments as you can ride out any dips in performance. You might also consider the ethics and sustainability of a fund’s investments.
- Insurance: A new fund might offer greater insurance coverage, but be sure to learn what it will cost you.
- Services: Some funds may offer investment advice or other services at an additional cost.
Spark a brighter future by taking control of your super today.
How do you know your super is on track?
By 30 years old, most Australian men have saved $23,712 in super, or $19,107 for women, according to the Association of Superannuation Funds of Australia (ASFA). If you’re far off these benchmarks, don’t stress. Start by finding out what you have and tracking down any lost super via the Australian Taxation Office.
Next, download our Super & Savings Benchmarks worksheets to figure out where you stand and what your next step should be.
Your golden years may still be far away, but the sooner you start thinking about it, the easier it will be to save for a comfortable retirement. If you need help getting on your feet financially, reach out to the team at Invest Blue today.
What you need to know
This information is provided by Invest Blue Pty Ltd (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.