Superannuation and retirement explained

As you are nearing retirement it is important you understand all you can about the transition from paid employment to retirement. Ensure you plan well before leaving work. Seek financial advice from a trained professional to help assess your superannuation and investments. They will be able to give you further instructions on how to improve your financial position. It is also important that you continue to have regular financial health check-ups after retirement so you can be sure your money will last.

So what is superannuation?

Superannuation is an investment that provides money for retirement. Employers must currently pay the equivalent of a minimum of nine percent of your base income into your nominated superannuation fund. Superannuation funds invest your money with the objective of providing a positive return on it. However, depending on your investment strategy your returns will vary from year to year. These savings should have grown significantly over your working life and are expected to provide you with the income necessary to fund your retirement. You can also make personal contributions to boost your superannuation and you may be eligible for the Government Co-contribution scheme.

Superannuation may not be covered by your Will so ensure you have nominated the beneficiaries who will receive the money in your superannuation in the event of your death.

How do you access your superannuation?

A superannuation fund has restrictions on when the funds can be accessed. Superannuation funds can be made up of three different types of funds.

1. preserved
2. restricted non-preserved
3. unrestricted non-preserved

To be access preserved funds you must satisfy one of the following conditions:

  • permanently retired after reaching your preservation age (55 if born before June 1960)
  • stopped gainful employment after turning age 60
  • reached age 65
  • left Australia permanently after having been a temporary resident on a specified class of visa;
  • meet special circumstances such as permanent incapacity, compassionate grounds, severe financial hardship; or
  • died.

It is a similar situation with restricted non-preserved funds, although they can be paid to you on leaving an employer.

Unrestricted non-preserved funds can be accessed any time. If you access part of your benefit before age 60, the payment will include both tax-free and taxable components.

Are you making the most of your superannuation?

It is generally in your best interests to make extra contributions to your superannuation when you can afford it, as you will generally be able to live a more comfortable retirement later in life.

Investigate whether you are eligible for Co-contribution, which the Australian Taxation Office calculates and pays, based on your tax return and information received from your superannuation fund.

‘Salary sacrificing’ is useful for high income earners if their employer will allow them to top up super before paying personal tax. If a person has an income of $100,000 and decides to contribute $10,000 of this to their superannuation, the $10,000 is taxed at a lower rate then their standard income tax rate.

Getting advice

A financial planner can give you up-to-date advice and figures on the best ways to save and plan for your retirement. It is also important to have regular financial health checks to ensure you are on the right path on your way to, and during retirement.

^Michael – Practice Development Manager

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