You may think your retirement is far off—so no worries, right? Not so fast. To ensure you have enough funds to live well when you retire, you need to learn what you need to do now to make sure you can have the lifestyle you’ve worked so hard to have—for the rest of your life. A big part of that planning has to do with your superannuation—your “super.”
Think About Superannuation Early on in Life
People used to start thinking about their super at around their fiftieth birthday, but now we know that thought process needs to start earlier—much earlier. The laws that govern your super can be difficult to navigate, but you need to dig into them to find out how to maximise your benefits. Do it now—and you can chart a wise financial course for a lifetime.
How does my super work? Supers work like managed funds. The government pools your super contributions together with other members and invests it. Your employer will contribute to your super fund, as can you—up to a certain amount per year. If you earn below a given amount, the government will also contribute to your super.
How do I choose a super fund? Ask your employer if you have a choice in the fund into which they pay your super. Some employers limit your choice of funds. If not, then you can get advice from a financial professional or look at comparison websites to help you choose.
Take Charge—Take Ownership
Your superannuation is just as important as your bank account. Perhaps even more so, since it’s your financial cushion for a time when your earning power isn’t as great as it is now. It’s your money, after all–so take ownership of it. Become proactive, and you’ll maximise your investments for a lifetime free from worry.
How can I maximise my contributions? If you’re not self-employed, the more you earn, the more your employer will pay into your super, since the amount required is equal to a percentage of your earnings—currently 9.5%. If you are self-employed, you must make your own super contributions. A wise guide would be to invest as much into your super as you would with another employer.
May I make extra contributions? Yes, you can. There is a limit, however. You can either ask your employer to deduct part of your pre-tax salary into your super, or you can transfer a part of your savings accounts into your super. You can also transfer part of other investment funds into your main super fund. Here’s where it pays to have some advice to learn which laws apply—and how to leverage those best for you.
How do I choose investment options? Because most super funds give you a choice of investment options that include various types of investments—shares in stocks and other funds, real property, or cash—it’s important to choose the best alternative for your needs. Your choice impacts your risk for market ups and downs, as well as how quickly your investment will grow. If you’re not a financial professional, it helps to talk to someone who is to help you sort out all your options.
Discuss Superannuation with Your Kids
Once you see how much benefit proper super planning can be to creating the kind of financial cushion that will ensure a comfortable life in one’s golden years, you’ll want to share your knowledge with your children. It’s never too early to plant the seeds of financial prudence.
Your kids, too, need to be aware of the opportunity they have to start early to build up their investments while they’re still young. Show them a disciplined pattern of saving, and they’ll follow your example to become savvy investors when they start earning their own money.
- Superannuation–a Lifetime Vehicle for Tax-Effective Investment: Teach your kids that from the moment they start working, they need to think about how their super will help them invest wisely so they can have a lifetime of income.
- Superannuation—a Legacy of Love: When your kids learn that their prudent planning can help provide for the needs of their own children, they will begin to look beyond the “now” and think more long-term. That’s a legacy that will outlast you—and help provide for your family’s future down through the generations.
Seek Expert Advice on Superannuation
Legislation changes constantly to keep up with the times. In fact, just this year, effective 1 July, there have been some major changes to the statutes that regulate superannuation—mainly to cap the amount that people may contribute to their super every year. Tax offsets, too, have changed, as have the rules for converting your super into a pension.
These changes are complex, so it helps to have someone who can sort through all the regulations to help you find the best way to save for your retirement.