The Australian government actively encourages people to embrace the concept of superannuation and dangles the carrot of tax benefits to persuade you to combine forces with your employer and find financial fitness through the power of a super fund.
There are a number of funds to consider, such as NSF Super for example, so if you havenâ€™t done so already, now might just be a good time to join in with the Australian citizens who already have a share of more than $2 trillion in superannuation assets.
What your employer should already be doing for you
If you are an employee earning more than $450 per month, you should already be receiving superannuation contributions from your employer into a super fund.
As it stands, contributions of 9.5% of your salary need to be made by your employer on a quarterly basis, into a nominated fund of your choice.
If you are not proactive about choosing a super fund of your choice, it is likely that your payments will be made into a super fund chosen by your employer instead.
Check with your employer or the super fund administrator directly, to confirm that these contributions are currently being made on your behalf. Raise the issue with your employer if you canâ€™t obtain any confirmation of the current status and if necessary, contact the Australian Tax Office for further clarification.
Assuming that everything is in order and your employer is already making contributions to a super fund on your behalf, it is often a good idea, depending on your personal circumstances of course, to consider topping up the fund with some additional contributions yourself.
Making these additional contributions will definitely help to give your retirement savings a shot in the arm, and it could make quite a difference when you come to retire.
Even relatively small additional contributions could conceivably make quite a noticeable difference to your retirement savings over the long term.
The best way to make these additional contributions would be through a salary sacrifice arrangement which you can set up with your employer. The reason for taking this route is because it takes advantage of tax benefits and is therefore an efficient way to make the most of your money that you are putting into your super fund.
You do also have the choice of making additional super fund contributions directly yourself if you prefer. Take some financial advice if you are unsure as to the best way to make payments as tax-efficiently as possible.
Solo or multiple accounts?
It is not always easy to narrow down your choice of super funds to just one, but one thing that you should bear in mind is that if you do decide to contribute to a number of different super funds at the same time, you will most likely be incurring multiple fees in line with your multiple account holdings.
These fees can make quite a difference to your money, especially if you keep multiple accounts over a sustained period of time, so if you want to have as much money as possible for your retirement, the prudent advice is to consolidate your savings into one super fund.
Choosing your fund
You only have to look at the performance tables for all sorts of different investment vehicles and options, to realise that there are some definite winners and losers.
Picking a super fund that underperforms in comparison to others, will potentially leave you feeling rather underwhelmed with the amount that you have available in retirement. Finding a super fund that fits your needs and does what it says on the tin by producing a super return, will often make a big difference to your retirement plans and comfort levels.
The first thing to do is to check with your employer whether you actually have a choice in which super fund your money goes into.
The majority of people should have the freedom to choose, but some are restricted by industrial agreements or members of a defined benefits scheme, that doesnâ€™t offer the option of choice. If you do have a choice, your employer will provide you with a standard choice form, which allows you to choose your own super fund or go with your employers preferred fund.
When trying to decide which super fund to put your money into, consider a number of different factors and compare funds to see which one comes out the best. A good investment performance over a period of at least five years is better than chasing the best short-term performer, and look at other things like fees and any extra benefits, before making your decision.
Being super smart about your super fund could make a big difference to your financial future.
Maddison Buckley has always found it easy to manage money, but knows others just can’t get a grip of it and their monthly pay check just slips through their fingers. She writes about personal finance, offering up advice and timely tips to help others.
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