What are some of the most important things you should know about your super? The first thing you have to know is that it’s your money.
In fact, it’s income foregone in your earnings years that you can draw on for income when you retire. The more you save while you earn, the more you will have to spend when you retire.
Secondly, the super that everyone has heard of is the Superannuation Guarantee (SG), which requires an employer to put a percentage of your income into your super account - currently, 9.5 per cent. However, you are allowed to put more in as a personal contribution either through salary sacrifice or as a direct payment.
Contributions are well worth looking at: if you salary-sacrifice the extra contributions over and above the SG, you are only taxed at 15 per cent, not the higher rate if you took the money as income. It’s a great incentive to save. The tax rate you pay on the earnings in your super fund is similarly taxed at 15 per cent, as opposed to the income tax you pay on investment earnings.
Another thing to focus on with super is returns and costs. The management costs of using a super fund manager can be anywhere from 0.6 per cent of funds under management to 2 per cent. A difference of 1 per cent in management fees can have a big impact on your super balance over time.
As for the returns, you want the money going into your super to compound. That means you want it earning good return on investments but without too high a risk of going backwards. For most super members this means finding a balance between your risk profile, your age and stage and your goals.
If in doubt about your super and the options available, you should see an adviser. It could make all the difference when you really need it.
Good retirements are made, not fluked. To get there, you need to take all possible scenarios into consideration – especially the negative ones. Understanding your situation and knowing what you need to do financially can be one less thing you have to worry about. Good luck.