Superannuation Simplified

Superannuation Essentials You Should Know Before Retirement

Wondering how much superannuation you’ll need before you can leave your job? These days it’s estimated that you’ll need to have at least $1 million to retire comfortably when you reach retirement age. Whether or not your balance is large enough to head for an early retirement, here are some things you should know about superannuation in Australia.

Employer contributions

If you earn more than $450 a month (before tax), then your employer must contribute to your superannuation. This is mandatory under Australian superannuation laws.

Previously employers were only required to pay 9.25% of your wages into your superannuation fund, but this has since risen to 9.5% of your total gross salary. This rate is expected to grow to 12% over future years.

Superannuation as a tax structure

Rather than seeing your superannuation as a retirement fund, you can also look at it as a tax structure. It is up to you what you choose to do with the money that is held in your super, and seeking superannuation advice from a professional can help you to grow your balance further.

Lower tax rate

Your superannuation is only taxed at a rate of 15%, compared to the average tax rate of 32.5%, plus Medicare. So if you decide to add some of your wages to your superannuation, you will be paying less than half the regular tax rate.

Potential insurance benefits

The majority of superannuation funds offer cover for different types of insurance, including life insurance and income protection insurance. Illnesses and accidents can happen when you least expect it, meaning that you may be unable to work for a period of time. If you’re covered by your superannuation fund’s insurance policy, at least there’s one thing less to worry about if disaster strikes.

Different types of superannuation funds

There are various superannuation funds, and it’s important to know about them because they are very different and one size doesn’t fit all. There are seven main types and these include:

  • Retail/Wholesale funds
  • Industry funds
  • Wholesale Master Trusts
  • Employer Stand-alone Funds
  • Self Managed Superannuation Funds
  • Small APRA (Australian Prudential Regulation Authority) Funds
  • Retail Master Trusts/Wrap Platforms

If superannuation is still leaving you confused, it might be best to contact an expert to help you organise your future investments.

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