Superannuation is the money put aside for retirement. For most Australians it is the primary investment vehicle used to fund their retirement. It is a nest-egg built over the course of working careers, incentivised by the Government in order to promote wealth creation. Superannuation has the lowest tax rate of any alternative.
When your money has been put into a superannuation fund the fund then invests it into different types of assets. These include:
- Defensive assets (cash, fixed interest – in Australia or overseas), and
- Growth assets (Property, shares – Australian and International)
It is vital that you are comfortable with the way your money is invested and that it is appropriately diversified to match your risk profile.
Benefits of Superannuation
There are many benefits of superannuation. they include:
- Tax deductions
- Favourable tax rate on earnings and capital gains of super funds (15%) – a rate lower than most of the person tax rates.
- Rebates if you are an employee (this is means tested)
- Extra benefits at retirement
Other benefits include:
- The ability to use pre-tax money to acess life insurance and disability cover (total and permanment disability – TPD)
- Asset protection – assets in superannuation can be protected from creditors i.e. bankruptcy
- Estate planning
Common questions Australians have about superannuation:
- I have several super funds – should I, and how do I, consolidate?
- Is my super fund right for me?
- Is my money invested in the right way? Am I taking too much or too little risk?
- Is it better for me to pay money into superannuation or pay off my mortgage?