If you’re a regular reader of RateCity’s blog, you’ll be aware of the many ins-and-outs of saving up for retirement. For those who have missed an article here or there, or are new to the blog, here is a quick summary of superannuation rules.
Choosing your super fund
How you accumulate wealth for retirement will depend largely on how much time you have until you hang up your hat.
Conservative options and balanced funds are less likely to fluctuate with market conditions and represent safer options, while those with plenty of time to ride out market conditions might opt for more aggressive funds with higher long-term goals.
Retail funds run by finance companies and banks are generally available to everyone eligible for super. However there are also funds that are limited to public sector workers and some that are set up specifically for a company’s employees.
There are several ways to increase your retirement funds. Just like your savings account, you can make extra payments to increase your returns. However, there are limits — pay attention to these to avoid being stung by extra tax.
You can also choose to salary sacrifice — asking your employer to deduct more from your earnings to boost your fund.
There is also the government co-contribution. If you qualify by falling within a certain income bracket, the government will match your after-tax contributions with 50 cents for every additional dollar you contribute — up to $500. Higher income brackets have lower co-contribution limits.
You can switch between fund types and even providers. Sometimes you may need to if you change work and your new employer can’t contribute to your old super.
However, having multiple funds can be a paperwork burden, and could also cost you more in fees and potential lost earnings if some funds perform better than others. You can consolidate by rolling over your super into one account.
Take control with an SMSF
A self managed super fund (SMSF) is a fund in which you can take an active role in the allocation of your investments. There is more work to do with this kind of fund and there is a lot of information needed to set one up.
You can form an SMSF with one member or up to four trustees — allowing you to pool resources. You can even have a corporate trustee. Make sure to get sound financial guidance when considering this option.
Whatever options you choose to pursue with your retirement savings, make sure you have a thorough understanding of the consequences and benefits. Asking for guidance from superannuation professionals is definitely recommended.