When it comes to retirement planning, you’ll most likely hear the term superannuation. Its purpose is to help people prepare for retirement and secure the future. Using a superannuation calculator can give you an idea of how much super you’ll have when you retire.
If you retire before reaching 60 years old, the superannuation will handle the 15% tax of the assessable amount until you reach the age of 60.
Without it, you’ll find it very hard to live comfortably once you retire. Aside from this, here are the other benefits of superannuation:
1. Lower Tax Rate on Contributions
Super is designed with a series of tax breaks to encourage contribution. You and your employer can set up a salary sacrifice agreement that involves exchanging the income tax rate with the lower 15% super contributions tax rate. There are different rules for low income earners and high income earners to be aware of.
2. Ability to Choose your Super Investment Options
If you are a member of a super fund you can generally specify what your risk appetite is for investment. You can decide on investment options such as Growth, Balanced, Conservative or Cash.
3. No tax upon retirement
There will be no tax on capital gains or income once your superannuation starts paying the allocated pension. If you retire before reaching 60 years old, the superannuation will handle the 15% tax of the assessable amount until you reach the age of 60.
4. Tax on Investment earnings
In general, money made through investments within a superannuation comes with a lower tax rate compared to those made outside of the superannuation. It’s usually taxed at a maximum rate of 15%. Capital gains longer than 12 months within the fund will be taxed at 10%. This can be further reduced by tax deductions or tax credits.
5. Investment in bigger assets
You and other superannuation members can pool your retirement savings so you can invest in bigger assets.
6. Less expensive insurance cover
Insurers can usually offer a more affordable deal when publicly offered superannuation gets insurance policies in bulk. Paying for insurance premiums is also more convenient since these can be automatically deducted from your superannuation account.
7. Continue the insurance cover
Many insurers have an option to keep your insurance cover even after leaving your employer. This is greatly beneficial for those who find it hard to get the same levels of insurance protection.
8. Co-contribution from the government
You can get a tax-free co-contribution or bonus top-up form the federal government if you make non-concessional contributions to your superannuation account.
9. Avoid insurance medical exam
There are large superannuation accounts that offer automatic cover for new members without undergoing a medical exam.
10. Death Benefit Nomination (DBN)
If you use a binding death benefit nomination, you can ensure that your money will go to the right people when you die.
Know other benefits of superannuation in Australia? Share your retirement planning or superannuation advice in the comments section.