Last editedJune 20212 min read
How are you preparing for retirement? A superannuation fund, or ‘super’, gives you a steady income stream when you stop working. You should set up your super as early as possible to maximise future savings. Find out more about how superannuation works in our guide below.
Understanding superannuation
So, just what is superannuation, anyway? A super is money that’s been set aside throughout your working life. It’s put aside into a dedicated superannuation fund and managed by a trustee, where it can be invested to help grow your savings pot with added returns.
The amount of superannuation money you’ll have access to depends on your contributions, level of investment risk, length of investment. It also depends on the type of investment fund you choose, and the returns earned throughout the duration of the fund’s life. Generally speaking, the more you add to your super, the more money you’ll have to live off in retirement.
Understanding the superannuation guarantee
Most Australians set up their superannuation when they begin their first job. Once you start earning over $450 per month, your employer must contribute 9.5% of your pre-tax income into the superannuation account of your choice. This is called the super guarantee. You’ll need to provide your tax file number (TFN) to take advantage of favourable super tax rates.
Getting started with a superannuation fund
When you start your first job, you’ll need to make some decisions to get the ball rolling. This begins with filling out a superannuation standard choice form and discussing eligibility with your employer. Most of the time, you’ll have the choice of your employer’s default superannuation fund and one of your own choosing. To choose the best super fund, you should consider factors like fees, insurance cover, and investment performance. Self-employed workers can also register their business and apply for a superannuation account.
How to track superannuation
Whether you’ve changed jobs or moved up the ranks in your current organisation, it’s always a good idea to check on your superannuation fund from time to time.
The Australian Tax Office (ATO) provides a central dashboard to track your super through their MyGov website. You’ll be able to view and consolidate your existing super accounts. It’s a good idea to verify the accuracy of your accounts as well, looking at things like:
Payslip information
Superannuation fund statements
Superannuation rate and fees
Options to add more money
How to add to your superannuation account
On this last note of adding more money, you’re free to top up your superannuation fund whenever you’re able to. Not only can you ensure there’s more money for retirement, but you’ll also benefit from the lower tax rates. Here are a few of the top ways to add to your savings:
Arrange salary sacrifice contributions with your employer
Make personal contributions
Split or share contributions with your spouse
Make a downsizing contribution when you sell your home
At times, you might qualify for additional government contributions so it’s a good idea to check in with your superannuation fund manager for advice.
Accessing your superannuation early
Although it’s set aside for retirement, there are a few extenuating circumstances under which you might be eligible to access your superannuation fund early.
You’re either temporarily or permanently unable to work.
You have been diagnosed with a terminal medical condition.
You are taking part in the first home super saver scheme.
You have an account balance less than $200.
You are going through severe financial hardship.
Apart from these situations, you’ll be able to cash out when you reach retirement age. Be sure to consider all superannuation rates and fees before accessing your fund. Finally, you can also opt to pass on your super to dependents when you pass away. This should be outlined in your beneficiary notification form.
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