Your superannuation fund, a topic everyone and their dog seems to be talking about these days, is an investment vehicle and not an actual investment. This is probably why so many Australians (both the general public and different professionals alike) appear to be confused by the subject. A good example of this is the fact that many people inquire about whether investing in super or property is a good investment, along with questions about which one will provide a better ROI.
Unbeknownst to many, a superannuation fund is essentially set up as a type of tax savings account, which means the right question to ask is whether the tax savings provided by the fund provide enough of an advantage to move your entire savings into it. Really, a superannuation fund is a structure that allows people to save in a tax-effective way and not something you’re directly making investments in – like you would with shares or a piece of property.
With all this in mind, Australians in different age groups tend to manage their super in different ways. If you’re stockpiling your money away into a superannuation fund, have you ever stopped and asked yourself whether or not you have the right strategy in place? Better yet, if it is the right strategy for your age? While we cannot necessarily advise you on whether or not that is the case (after all, everyone’s situation is different), it is important for people in different age groups and life stages to approach their super in the way that best suits their age and life stage.
Your 30s and 40s
What quite a few Australians in these age groups tend to forget is that their 30s and 40s are, more often than not, the main opportunity they will have at earning what will later become their retirement. They have the benefit of earning and saving over a longer period of time making these years the best time to begin saving and investing.
Although the earlier the better, even coming up with and starting a superannuation fund strategy now will be a huge benefit to the person saving. Quite often, people in this age group do not tend to have a large amount of accumulated wealth, rather, they often have a lot of accumulated debt that they are trying to dig themselves out of, which often slows down the saving process or even has it at a screeching halt.
If you’re looking at getting started, it is important to ask yourself the right questions so you can develop the right strategy and plan. Here are some important questions to consider when putting this strategy or plan together are:
- How much super do I need to retire well?
- How do I choose the right super?
- Am I planning on making regular contributions to my super?
- If so, how much and how often?
- How will my funds be invested?
- When will I have the ability to comfortably retire?
Asking yourself these types of questions is a great way to get started, however, they will not yield much of a return until you start putting your super plan into action.
If you’re in your 50s, you most likely have accumulated some wealth in preparation for retirement, so the amount you save will be probably be quite different compared to someone in their 30s and 40s. Additionally, people in their 50s generally do not have the same amount of debt as someone in their 40s might, let alone the same financial obligations, such as putting a child through school or even raising small children at home.
In some cases, there are also people in this age bracket who have school-aged kids at home or just leaving the “nest,” which again will heavily determine the amount of money they are able to move into their super right now. Depending on the circumstances, a person may have the ability to put more into their superannuation fund compared to someone in their 40s – and while this is the general idea it is not always the rule as there are many different circumstances and factors to consider when saving for retirement.
Late 50s and Early 60s
Most people in this age group usually know when they plan to retire and for them, the date is fast approaching – so they are usually dumping as much money as they possibly can into their fund in preparation for retirement. They are often at a stage where all kids are gone, most bills are paid, and are usually doing what they can to stash as much money away as possible so they are ready to comfortably retire.
If You’re Retired and Over 60
If you happen to be retired and over the age of 60, then using the superannuation fund as an investment vehicle is a great idea because you can withdraw your money without paying tax. There are of course a few other restrictions and rules, and it’s important to know if the regulations on super have changed and when those new regulations come into effect.
If a person is not careful with decisions relating to super, there could be substantial and often unnecessary penalties or taxes, as well as missed growth opportunities that could have a significant impact on your retirement planning. Additionally, legislation and rules are constantly changing; for example, the age for taking advantage of the very generous concessional, before-tax contributions has changed from 55, then to age 56, but will be available to everyone starting July 1, 2017.
Before shifting your funds over to a super account, or making any other major decision about how you want to structure your super and retirement strategy, it is important to try and do as much research as possible on the subject first. If possible, it may be best consult with a good financial advisor on the Sunshine Coast or one in your local area first for some professional advice as well.