Superannuation
Superannuation is one of the most important assets an individual will have in retirement. Superannuation is expected to be the major source of income for retirees.
What you know and what you decide about your superannuation can make a big difference to the money you have to retire on.
Through superannuation, you save and invest money during your working life to get a pension or lump sum when you retire. Your superannuation will grow because:
- your employer and/ or you make regular contributions,
- your superannuation fund invests your money, and
- your fund gets tax concessions that boost your earnings.
By law, you generally get your superannuation payout only when you:
- permanently retire from the workforce, and also
- reach the minimum age set by law
Except for death, permanent incapacity or special situations, you cannot get your super early.
If you can spare the money until you retire, consider contributing extra out of your own money on top of what your employer puts in. Some employers encourage you by offering to put in extra money if you do. Even if the fund your employer uses does not allow you to contribute your own money, you can contribute to an industry fund open to the public or a retail fund. An Outlook Financial Planner can help you develop a suitable strategy.
Superannuation can be a very tax efficient investment vehicle too.
Depending on your circumstances and requirements your financial planner may suggest a financial strategy that utilises superannuation as a vehicle to enter the investment markets.
Pre- tax contributions, where the contribution is made as part of a salary sacrifice strategy, can be more tax efficient for the individual. This is so because contributions to superannuation are taxed at a much lower rate as compared to the income tax thresholds.
Any earnings on this investment are re-invested therefore continuing to attract a lower tax rate. Your financial planner can help assess whether such a strategy is suitable for your circumstances.
Some of the important considerations before such a strategy can be implemented are:
- Your objective should be to fund retirement in tax effective manner
- Contributions to your superannuation cannot exceed your age-based maximum deduction limit (set by government regulation each financial year)
- Super funds allow no access to capital, until you meet age requirements & retire from workforce
- Superannuation surcharge tax may apply to contributions
Outlook can also assist clients with rollovers and consolidation of superannuation monies into one account. If appropriate, consolidation can save you unnecessary duplication in administration costs and erosion of earnings.