All that we’re saying … is give super(annuation) a chance
In my opinion Superannuation continues to unfairly cop a hammering in most sectors of the media due to the follow on effects of the investment volatility of recent times … in the media a real distinction ought to be made between Superannuation as an investment structure and the underlying investments held in an individuals Superannuation fund.
Whether you are in your first job after leaving school or only a few years from retirement, it pays to understand how superannuation works. By the time you are ready to retire, your superannuation could have grown to be one of the largest assets you will have in your life. Superannuation is an investment in your future … it’s important to understand why you need it, what you’re entitled to, how you can contribute, the choices you can make and how you as an individual can best manage your superannuation investment up to the point in time you retire; and the fulfilling life you choose to live in the period that follows.
When it comes to achieving your long term financial goals , superannuation within the Australian structure is still one of the best ways to accumulate wealth and save for your retirement. One of the great things about superannuation is that you get to take advantage of some powerful tax concessions on both fund earnings and contributions. Favourable tax concessions within the superannuation environment means your money has the potential for greater growth than when compared to most other investment structures available.
Depending on your own individual circumstances, there may be some other great incentives – like claiming a tax deduction for your own contributions or receiving a co-contribution from the Australian Government.
Your Superannuation is generally preserved until your retirement – (nothing in life is free … thus any strings attached to accessing your Superannuation is a natural trade off for the concessional tax treatment received). Therefore, it may not be the most appropriate investment vehicle for additional savings for all people depending on their own stage of life. That is, you may want to access your funds earlier for possibly either school fees, loan repayments of family holidays.
Instead of making additional contributions to your super, there are some other ways you can ensure your super is working hard for you. And as your super is compulsory, why not make the most of it?
By holding life and permanent disability (TPD) insurance through Superannuation, you may be able to reduce the effective cost of your insurance premiums considerably. When you take into account the potential tax savings, it’s also possible to purchase a higher level of cover when compared to insuring outside of Superannuation.
One strategy to make the most of your super is by consolidating it. Have you found that over the years you have become a member of several super funds for no particular reason? This is often a result of changing jobs, as each time you start a new job, your employer establishes a new super fund for your employer contributions. Consolidating your super into one account can help you reduce administration fees, reduce the number of statements you receive and make it easier to keep track of your super savings.
In addition to consolidating your super, you should also make sure your super is invested in the suitable investment option in line with your long term financial goals and not just your employer default fund which may not be appropriate for you. As mentioned earlier, your super can generally not be accessed until you retire so you may benefit from investing a little more aggressively to potentially receive a greater long term return. As super is taxed at concessional rates it also provides a great environment to invest in International shares that generally provide no taxation benefits such as the franking credits enjoyed by investing Australian shares.
But before you make your investment choice, you should also consider your goals, needs, financial situation and comfort with the market ups and downs that do occur. To determine a mix of assets and superannuation strategies that suit your needs, you should speak with a professional Financial Adviser.
To get the most out of your Superannuation you need to be ‘Super Smart’. You need to understand how the rules work and use them to your own advantage. You also have to keep up with the latest rule changes so you can determine if you need to take action and adjust your own plans and choices made.
If you haven’t had the time, or the inclination, to review your superannuation and how it fits into your overall financial plan … it could be time you did. With apologies to John Lennon … All we are saying, is give superannuation a chance.
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