What is Superannuation in Australia? How does super work?

Summary

Superannuation, or "super," is a critical investment for Australians, designed to support retirement savings through a blend of contributions, compound interest, and tax benefits. Throughout one's working life, contributions and investment returns are lightly taxed, allowing savings to grow until they can be withdrawn tax-free after age 60. Employer contributions, known as "super guarantee," require employers to contribute to an employee's super fund, further augmenting retirement savings. Super funds invest in various asset classes, and choosing the right fund can significantly impact financial outcomes in retirement.

Highlights

• Super is designed to build wealth for retirement with tax advantages. 💪
• Employer contributions enhance super savings, contributing 10% of the base salary. 💼
• Super funds offer various investment options like cash, property, and shares. 📈
• Regularly review super fund performance and fees to optimize retirement savings. 🔍
• Consolidating super funds could save costs, but check insurance implications first. 📑
• Download Canstar's guide for strategic tips to improve your super balance. 📚

Key Takeaways

• Superannuation is a retirement investment tool for Australians with benefits like compound interest and tax perks. 💰
• Employer contributions, or 'super guarantee', boost your super fund savings. 🚀
• Understand your preservation age, as it determines when you can access your super. 🕒
• Choosing the right super fund can optimize your returns, so compare fees and performance. 📊
• Consider consolidating multiple super funds to maximize efficiency but check insurance details first. 🤔

Overview

Superannuation, affectionally known as 'super' in Australia, is a strategic financial tool designed to accumulate wealth for retirees. It involves a combination of employer contributions, personal savings, and investment growth, all with a sprinkle of tax incentives along the way. Contributions are regularly made and lightly taxed, allowing the fund to grow through compound interest until withdrawals can be made tax-free post the age of 60. The preservation age, dependent on your birth year, regulates when these funds can be accessed, safeguarding retirement savings.

Employers play a crucial role by adding to an employee's super account. The 'super guarantee' mandates a 10% contribution from an employee's base salary, which is set to be more inclusive by removing the income threshold that required earning over $450 per month. The importance of choosing a suitable super fund cannot be understated as the funds are invested into various asset categories like cash, property, and even shares, providing the flexibility to align with individual risk appetites.

Regularly monitoring your superannuation account can make a significant difference in the long run. By ensuring your fund performs well with manageable fees, considering consolidating multiple accounts, and being mindful of the insurance tied to each super fund, one can streamline their retirement savings effectively. For a thorough understanding and up-to-date strategies to maximize your super, Canstar offers an annual super guide, helping secure financial stability in retirement.

Chapters

• 00:00 - 00:30: Importance of Superannuation Superannuation is a crucial investment for one's future, consisting of three key components that contribute to wealth-building. It involves long-term investment, where compound interest plays a significant role. Regular investments help leverage dollar cost averaging, and there are notable tax benefits. During one's working life, contributions and investment returns are taxed at a lower rate, and from age 60, super savings can be withdrawn tax-free. Superannuation is tailor-made for retirement purposes.
• 00:30 - 01:00: Accessing Superannuation The chapter "Accessing Superannuation" explains that superannuation funds are preserved for retirement, and restrictions on access are based on the individual's preservation age, which is determined by their birth date.
• 01:00 - 01:30: Superannuation Investments This chapter discusses the concept of 'superannuation guarantee', which is a portion of salary allocated to a super fund for investment. The funds in a superannuation account are invested across various assets ranging from cash and fixed interest to property and shares. These investment options are categorized into conservative, balanced, and growth options, allowing individuals to select according to their preference. Moreover, some super funds offer the flexibility to invest in specific shares or ETFs. It emphasizes that superannuation is essentially your own money saved for the future.
• 01:30 - 02:00: Maximizing Superannuation Benefits This chapter discusses the importance of managing your superannuation well ahead of retirement. It offers practical advice such as checking if your super fund is performing well and ensuring fees are not too high. It suggests comparing different funds to find one with lower fees and a solid performance history, and consolidating multiple super funds for efficiency. However, it emphasizes the need to review insurance covers before closing any funds.
• 02:00 - 02:30: Further Resources The chapter titled 'Further Resources' provides information on how to take additional steps to enhance your superannuation savings (super). It suggests downloading Canstar's annual super guide, which contains updates on current changes that may affect you and offers strategies to help grow your super balance at any age. The guide is available for download through a link in the video's description.

What is Superannuation in Australia? How does super work? Transcription

• 00:00 - 00:30 Super is one of the most important investments you  can make for your future. It's made up of three   ingredients that can help build your wealth. It's  a long-term investment so the magic of compound   interest kicks in. Investments are regular so you  benefit from dollar cost averaging and then there   are the tax perks. Super is an investment  designed especially for your retirement.   During your working life, contributions  and investment returns are lightly taxed.   Then from age 60 you can actually withdraw  your super savings tax-free. To ensure your
• 00:30 - 01:00 money is preserved for retirement, limits apply  on when you can access your super and this is   determined by your preservation age which depends  on when you are born. If you work as an employee,   you're entitled to employer paid contributions so  long as you earn over $450 per month before tax.   And the good news is, this threshold  is set to be removed from July 1 2022.   Your boss needs to make contributions worth 10% of  your base salary and this is on top of your annual
• 01:00 - 01:30 salary and it's known as 'super guarantee'.  Money held in a super fund is invested in a   range of assets by your fund and this could be  anything from cash, fixed interest to property   and shares. Investment options generally  fall into conservative, balance and growth   and you can get to choose which one best  suits you. Some super funds even allow you   to choose specific shares or ETFs to invest in.  Remember your super is your hard earned money.
• 01:30 - 02:00 While you may not be able to access it and right  now, looking after your super now could make all   the difference when it comes to your retirement.  There are a few simple steps you can make to make   sure that your super is working for you. Check  that your fund is performing well and you're not   paying too much in fees. Compare super funds  to find a fund with a lower fee and a good   performance track record. Consider consolidating  if you've got a number of super funds out there.   Do take care here and check your insurance side  of things before you do close any super funds. For
• 02:00 - 02:30 more actions you can take to shore up your super,  download Canstar's annual super guide to stay   on top of the current changes that could impact  you. It's full of smart strategies to help build   your balance at every age. Download it today  the link is in the description of this video.