Superannuation is among the most popular platforms for Australians to grow and save money for retirement.
Most Australians get paid compulsory superannuation benefits (the Superannuation Guarantee) by their employer, however, many people choose to add more to grow their balance as well.
It’s definitely not the only platform you can use to save and grow your retirement fund. You can always invest in shares, real estate properties, unit trusts, term deposits, or insurance bonds, However, there are unique benefits that come with investing in superannuation, as you’ll find out in this article.
What is Superannuation?
Super is a compulsory scheme developed by the Australian government to help Australians build a healthy retirement fund while minimising dependency on the age pension.
It is a retirement savings account that most people build up through their working life. For most of us, it is primarily made up of contributions provided by your company (typically a percentage of your income) and any personal payments you make.
Your super fund will actually invest your retirement fund savings for you. Some things they invest in include blue-chip stocks, equities, and mutual funds. This will help the money to keep growing instead of just sitting there and actually losing value due to inflation.
As you earn capital gains and profits, your super will allow you to live comfortably whenever you retire. Once you retire, you will be free to withdraw your super and utilise it in any way you see fit.
However, many people who solely rely on the Super Guarantee won’t have enough money for their whole retirement. This is where voluntary super contributions come in handy. Plus there are other benefits you may be able to enjoy by contributing extra to your super.
Enjoy the 4 Benefits of Superannuation
You Can Pay Less Tax
A straightforward approach to decreasing the income tax you pay each year is by contributing to your super fund. By setting up a salary sacrifice arrangement with your employer, you can exchange the income tax rate you would usually pay on a portion of your wages for the 15% super contributions tax rate.
You can also make voluntary after-tax contributions as well to boost your super.
You Can Receive Cash Support From The Government
If you make voluntary after-tax super payments, you may raise your retirement savings even more by taking advantage of the government co-contribution.
For each year you make super contributions, and the government will determine if you are eligible for a co-contribution. The amount of government co-contribution you receive will depend on your income and how much you contribute to your superannuation.
This co-contribution is only available for low to middle income earners, however for those on a regular high income, this may be beneficial if you or your partner takes maternity/paternity leave.
You Can Enjoy Easy Access To Insurance
Because most publicly traded super funds buy insurance policies in bulk for their members, you can have easy access to insurance policies. Plus, you may even get a cheaper insurance policy by going through your super fund.
It can be a cost-effective insurance solution for yourself however, be sure to know the coverage details of your policy to ensure it will be enough for you and your family.
A Reliable Nest Egg When You Retire
Your superannuation is purely designed to help you live securely when you retire so you can have a comfortable, stress-free lifestyle.
Plus, you’re typically able to access your superannuation tax-free in your retirement. This is available to you whether you withdraw money through a superannuation income stream, or a lump sum, provided you’re with a taxed super fund.
The main thing is to ensure you will be able to do the things you want in retirement without having to worry about running out of money.
Should You Invest in Your Super?
Taking an active role in your super savings during your working years is worthwhile. It’s your money, and the performance of your super over time will determine how much you have to fund your dream retirement.
If you’re looking for more advice like this or need financial planning for retirement, meet with an expert from EJM Financial Services today!
Our expertise lies in helping you figure out your steps to financial independence and we aim to Create Happiness for every client of ours!
Take the first step and book a complimentary session with our financial planners in Melbourne today.