5 myths about superannuation
Superannuation may seem complicated but it doesn’t have to be. Here are five common myths together with the real facts about your hard-earned retirement nest egg.
1. My money is locked up and there’s no point worrying about it until I retire
Your super is a lifetime investment project that starts when you first enter the workforce and needs to last for life, and the longer you plan for it the better. Even though you can’t access your super until you reach retirement age or a condition of release (e.g. retirement, death or invalidity), you still have control – it’s your money.
You can move your super between funds as well as adjust your contribution levels. Some people may choose to have a Self Managed Super Fund (SMSF) to give them more control. However, SMSFs come with more responsibility, given your obligation to also be a trustee. To find out about your choices and how to have the control you want over your super, speak to a financial adviser.
2. I’ve worked my whole life so my super should be enough to provide for my retirement
Sure, your super is designed to support your retirement. However, the level of support it will provide depends on a range of factors. As a starting point, ask yourself two key questions:
- How much income and savings will I need in retirement to cover my living costs?
- Will I have enough super at my planned retirement date to achieve this?
The answers will help you work out how ready you really are for retirement. And once you’re clearer on what’s needed, it might pay to seek financial advice to help you put an effective retirement planning strategy in place.
3. My pre-tax contributions to my superannuation are 100 per cent tax free
Unfortunately this isn’t true – there is a 15 per cent tax on every super contribution, including compulsory contributions made by your employer or voluntary contributions you make yourself. And this rate increases over certain amounts. So while the tax on your super is generally going to be lower than your usual income tax, making it a very worthwhile option, there is still tax payable. There are methods and strategies to minimise the tax you pay on super, but you need to speak to a professional to find out how.
4. Retirement means I’ll have to stop working
Wrong. Just because you retire, it doesn’t mean you need to stop working entirely. If you don’t feel ready to retire fully – either financially or emotionally – then working part-time or casually could be an option for you. There is no set age at which you need to stop working. But the benefit of getting older is that you can access your super and enjoy tax breaks on your income and earnings.
5. Industry super funds don’t charge a commission
Industry super funds can be structured differently to commercial funds in terms of the costs you pay. However there are still charges that apply, so it pays to review all fees and charges when choosing the best fund for you.
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