The thing with Superannuation is that it sounds like something you won’t need for a really really long time. But as finance guru Penelope Joye advises, it’s best to get it sorted early.
“What’s so special about super anyway? If you don’t know let me, respectfully, suggest that you should. After all it’s your money.
1. Super is the most tax effective investment structure in Australia today. Superannuation monies are tax free after age 60. That’s right, tax free. Can’t do better.
2. But what is super? Good question, I’ve heard it many times. Super is simply the name for money that is preserved until a certain requirement is met (for example retirement or age). It can also be taxed at a lower tax rate than you usually pay on your non super money. So, in a nutshell, the key things that make super different are access and rates of taxation.
3. Where is my super? Not sure? Lost track of it? You’re not alone. It’s estimated there’ s around $12.96 billion dollars in “lost” super in Australia. One in three working Australians have unclaimed Super so that could mean you too. Especially if you’ve changed jobs or say changed your name when you got married. All private sector superfunds must report and pay their unclaimed super money to the ATO so that’s the best place to start the search for any unclaimed money. Go to www.ato.gov.au and use their “superseeker” facility to track it down. They also have a 24/7 phone line 13 10 20 but, hot tip, have your tax file number handy in order to access this information. As an added bonus if the balance is less than $200 you can withdraw this money tax free, regardless of your age.
4. How much are you contributing? Most people don’t have a clue how much they are putting into what is likely to be the biggest asset they have, outside of the family home. Start by knowing what you are entitled to contribute for your particular age (this varies) and then look at what is actually being contributed. If there is a gap you may have an opportunity.
5. How much should you contribute? This is a “how long is a piece of string” type question. The correct answer critically depends on your age, cash flow and lifestyle, existing debt, years to retirement and so it goes on. Examine your particular circumstances with an expert.
6. When CAN I get my hands on it? For some of us, this can be as early as age 55 (your preservation age) but this will vary depending on your date of birth and whether you have retired. For those people that have met their preservation age but have not yet retired, you may be able to access some of your super so it is worthwhile seeking advice from a professional. Put it this way (and in answer to a question I was recently asked) you can’t access your super at age 26 in order to pay off a credit card debt!
7. I’ve been contributing for years, why don’t I have more? For starters look at consolidating multiple super accounts. Multiple accounts add up to multiple fees and diminishing economies of scale. Then look at your investment options. Are your choices appropriate for someone of your age? Does it match your attitude to risk? If you are super conservative don’t hold your breath for double digit returns. Ditto if you are a thrill seeker, don’t be shocked if your money goes down when the markets dip. This is complex and needs thought and serious analysis. Choosing your super options is not a case of: if in doubt choose option B or the default fund. Be prepared to call in an expert. Get it right or risk disappointment. And disappointment in retirement is not something you want to experience. Period.”
Do you have super? Do you know where it is?