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Living comfortably even when you reach retirement is the ultimate dream for many Australian’s. They key for this is planning for your retirement and the expenses beforehand. Retirement planning is crucial for anyone wanting to live a comfortable life after their working days. Retirement planning in Australia is made easy with compulsory superannuation in Australia.
In simple terms, personal superannuation in Australia (sometimes simply referred to as ‘super’) is money that has been put aside and saved during the working years. The money saved during these years is used as a regular income source during retirement.
The idea behind superannuation is to have enough money to live on after you have finished working. The more you accumulate during your working days, the more you will have after you retire! The Australian law states that the employer must pay money into a super account during the course of employment. The employer is obliged to put 9.5% of the employees wage aside, this is called the superannuation guarantee.
Apart from this money, the employee, too, can add some extra cash into their super fund in order to have a bit more later on when they are no longer being paid wages.
In general, superannuation is managed by a super fund.
The general principle behind the superannuation retirement plans in Australia is rather simple: The more money you have in your account, the more money you will have to live off after you retire. Therefore, the most important superannuation advice anyone can give is to put as much money in your super fund as you can afford to in order to ensure comfortable retirement days!
As already mentioned, your employer must pay 9.5% of your income towards super. This is called the Superannuation Guarantee.The Superannuation Guarantee, will gradually increase to 12% in coming years.
Most of the employers have a default superannuation fund in which they generally place their employee’s super money into. Employees, however, can ask for another fund to receive their superannuation contributions of their own preference.
Superannuation accounts are the very basis of successful retirement planning in Australia! The earlier you start saving money for your retirement, the more time you have for your savings to grow. It’s a good idea to talk to a financial advisor for retirement advice on your own retirement plan and start saving early.
Apart from minimum contribution amount, the Australian government has some other restrictions when it comes to the Australian superannuation: more specifically, you have to wait until you reach retirement age in order to access your saved funds. This is called the preservation age and ranges between 55-60 years old, depending on when you were born.
Everyone wants to live as comfortable as possible once they retire. And being comfortable means having enough money to spend, even when you no longer receive a regular way.
In modern Australia, this would not be possible without superannuation retirement plans. These plans are designed specifically for the needs of retirees.
Retirees can choose between having a constant monthly income or withdrawing the entire lump sum. Either way, they are guaranteed money that they would otherwise not have, especially at a time where the aged pension might not be enough to support your lifestyle.
Apart from this, there are also some tax advantages for those saving money via their superannuation fund. In general, super will be taxed at a lower rate than a similar investment outside super. If you put your personal after-tax money into your super account, you could receive a government co-contribution, too. This co-contribution depends on how much money you earn! This is why it is really important that you get some financial advice regarding your superannuation, as there are so many little details that could be important to your own personal circumstances.
Another important benefit of the superannuation in Australia is the possibility of getting insurance cover through your super fund.
Superannuation funds in Australia generally have three types of insurance for their members:
With the Life Insurance cover linked to your superannuation account, you beneficiaries will get either as a lump sum or an income stream should you die.
Significant amount of money will be paid to you if you become seriously disabled, in any way, and/or are unlikely to ever work again.
With the Income Protection cover, you get a constant income stream for a certain period if, by any chance, you can’t work due to temporary disability and/or illness.
It’s important that you review your superannuation fund to determine what your level of insurance cover is and if it meets your requirements. This is an important point as just because you are insured via your super fund, doesn’t necessarily mean that you have enough insurance cover for your particular circumstances.
There are different types of superannuation funds in Australia. We have outlined the 5 main types of super funds that Australian’s can choose from.
The 5 superannuation funds in Australia are:
While some industry superannuation funds are open to anyone to join, others usually target workers from a specific industry only. A good example of such fund is the HostPlus — a superannuation fund for the workers in the hospitality industry.
Industry superannuation funds are usually low to mid cost funds, which make them an affordable choice and they are generally also ‘not for profit’ funds which means that the profits are put back into the fund for the benefit of all members.
Retail superannuation funds are generally open for everyone and are run by financial institutions and fund managers.
They are usually accumulations funds, often recommended by financial advisers, that can range from mid to high cost!
Corporate or, employer superannuation funds are arranged by the employer, for the employees. They are generally open only to employees working for the specific company. They are not compulsory though.
They are usually low to mid cost for larger companies and high cost for smaller ones.
The public sector superannuation funds are only available to public sector employees, such as Federal and State government employees, and in some cases, ex-public sector employees.
These funds usually have very low fees and profits are put back into the fund for the benefit of all fund’s members.
Self-managed superannuation funds or SMSF have become increasingly popular over the past few years.
As the name itself suggests, Self-managed superannuation funds are owned and managed by individuals or small groups with no more than 4 members.
These funds are private and managed by the members. They are regulated by the Australian Taxation Office. Each member of the group is a trustee (or director if there is a corporate trustee). There are rigorous laws around compliance and payment of tax within these funds, so it’s important that you get the right advice when you are managing your own superannuation.
Most people can choose their own super fund even if the employer has a default one. The employees can request having their super funds transferred to an account at a different super fund. All they have to do is notify the employer about their preference by filling in a Standard choice form from the Australian Taxation Office (ATO). Your work’s human resources department should be well aware of the requirements around selecting your own fund, so have a chat to them first.
Aside from having a good understanding of the types of funds offered, their advantages and disadvantages, using a retirement calculator or superannuation calculator is also important when considering your superannuation. By using a superannuation calculator or retirement calculator and consulting with a professional, you will have a better understanding of your situation.
Superannuation calculators for retirement planning in Australia are a great tool to have when deciding on a superannuation plan. Superannuation retirement calculators are the basis of every thorough retirement plan. These retirement calculators help in working out how much super one will have when they retires and how the fees will affect their final payout.
Retirement calculators are generally very easy to use. In just a few clicks, these superannuation retirement calculators will do the math for you and show you how big the lump sum will be at the end of your working years and how much will the potential monthly income flow be.
Such superannuation calculators are the basis for a thorough retirement planning!
Make a good future for yourself by taking some money out of your income and placing them in one of the superannuation funds available in Australia. A good super can make all the difference in the world. So, get informed, use a reliable superannuation calculator and start saving early!
How does Superannuation work? In Australia your employer will pay 9.5% of your wage into a superannuation (super) fund. This is planned to increase in the future but for 2016/17 it is set at 9.5%. You can also make regular additional contributions into a super account yourself or ask your employer to deduct money from your salary. The regular contributions add up over the...Read More →
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