(03) 9020 2905I’ve been waiting for a bus. For a long time now. Clearly, it’s not coming. It’s time to concede. “Stuff it, I’ll walk”.
Okay, time for a quick superannuation lesson. I’m doing it myself in the absence of a government-sponsored education campaign (that’d be the broken down bus still at the terminal). I’ve got 700 words.
From a purely conceptual basis, super isn’t complicated. It’s quite simple.
Head office (the Government) insists you put away for your retirement. You’re going to be NOT working longer than previous generations. On average, you’ll live well into your 80s.
To encourage you to comply with this HO directive, you’ll get tax-breaks for contributing to super. While the money is in there, it’ll just be taxed a touch. Not much.
And when you’re done with work, you get the money back, usually tax free. Take it as a tax-free lump sum. Take is a tax-free income-stream. Either way, less tax.
More good news … most of you don’t actually have a choice about contributing. It’s just looked after for you. For employees, your boss must kick in 9.5 per cent on top of your salary to super. Automatic. It just happens. (If your boss doesn’t do it, she’ll get whacked by the tax office.)
If you’re self-employed, you don’t have to contribute. But you still get the tax breaks, so it’s worth it.
So, here’s the deal: A tax-break when you put it in, bugger all tax when it’s in there, and tax-free at the end.
Tax breaks are cool. I like tax breaks. You don’t?
Most of this happens without you having to think about it. And if you want to continue on in blissful ignorance, you’ll probably be okay. If you do nothing, never think about it, ignore this whole superannuation thing, there’ll still probably be a big pile of dough for you. No sweat from you and a big pile of cash. It’ll probably be worth more than your house when you get it.
How could that not be cool?
But if you want to think about it … if you want to “add some value” … if you’re thinking, “can I take it a step further?” … the answer is “yes, you can”.
To make the most of your super, there are three things to think about. Either do it yourself, or get help from a qualified financial adviser.
Contribute more
Under 50? You can contribute up to $30,000 a year into super. This includes the 9.5 per cent your employer kicks in. If you want to put in more, go for it. You’ll generally save yourself some tax up front. And all the other cool stuff (low tax in the middle and no tax at the end) will apply.
If you’re over 50 and still working, you can go up to $35,000.
Get your insurances in super
You got kids? You got yourself a significant other? Do you love them? Do you want them to be okay financially if something happens to you?
Yes? Then you probably need some insurances. Super’s cool here too. You can get some of the insurances that you need (I’d recommend life and TPD) inside your super fund.
It’s a tax deduction to your fund, which makes it cheaper. If you’re worried it might eat into your super fund’s balance, you can contribute more (as above and yes, you get tax breaks for doing so) to your fund.
Take an investment risk
Gazillions of years of investment returns show shares and property outperform cash and fixed interest, over the long run.
If you’ve never taken an interest in your super fund, you’re probably sitting in a “balanced” fund. A balanced fund has, on average, 60 per cent of your money in shares and property and 40 per cent in cash and fixed interest. Give or take.
Remember, you can’t access super until you’re between 55 and 65. And it’s then it’s supposed to last you for decades. If this “decades” thing has just clicked, then you could consider moving your super money from the the plain-Jane, boring, vanilla, balanced fund into something with a little more risk and a little more in shares and property.
Get aboard the bus. There. Super in 700 words.
Bruce Brammall is the principal adviser with Castellan Financial Consulting (www.castellanfinancial.com.au). E: bruce@castellanfinancial.com.au.