Understanding Your Superannuation

Understanding superIf you live and work in Australia, there is a likelihood that you already have a superannuation account set up. This is because all employers are required to make regular payments to their employee’s super account. This account is used to help people prepare for their retirement years and cannot be accessed, except for in extreme cases, until your reach your retirement age. Although, you will not have access to this money until your retire, it is important that you understand your superannuation account now and how it will help you once you reach retirement. Below is some basic information about this account, how it is funded, and how it can protect your future.

Employer Contributions
Employers are required to make contributions to each of their employee’s superannuation account on a regular basis. Currently, the government requires companies to contribute at least 9.25 per cent of each employee’s gross wages. This amount is not deducted from your pay cheque but rather it is an additional amount that your employer must contribute for your retirement.

Your Contributions
In addition, you can also make regular payments to your super account to help you plan for your future. While these contributions are not required, they are strongly recommended, and once you reach retirement age, you will be glad you make regular contributions throughout your lifetime. You can ask your employer to take a set amount out of your pay cheque on a regular basis and submit it to your super account. This makes it very easy to make contributions and eliminates that risk of your spending the money instead of saving it for your retirement.

Government Contributions
If you are a low-income earner, who makes under $37,000 a year, the government may make additional contributions to your super account to help you prepare for your future. The government will pay up to $500 per year, depending on your specific set of circumstances.

How to Choose a Super Account
Legally, your employer is required to allow you to select the super account you want your contributions to go into. If you do not select a fund, your employer will choose one for you. To maximise your super account, you should take the time to explore your options and choose the super account that works best for you. When comparing different super funds, be sure to look at the type of fees they charge, the benefits they offer, their performance record, and the types of services included with the fund.

Insurance Options
Some superannuation funds also provide a low-cost insurance option for its members. These funds offer several types of insurance, including income protection, disability and life insurance. These covers usually have fewer benefits than private insurance, but are also offered at a substantially lower rate, and may be worth checking to see if it is a good option for you and your family.

How is the Money Disbursed?
Once you reach retirement age, you will be given access to the funds in your super account. You can request that these funds to be disbursed in several different ways, including one lump-sum payment that will give you access to all of your funds at one time, regular monthly payments made over several years, or a combination of both. You should consider all of your options carefully when making this decision.

Understanding your superannuation fund now will help you prepare better for your future. Take your time to look over the different funds available to you to ensure you select the one that will offer you the best services. Once you choose a plan, check on your account regularly to keep track of your savings. This will help you be prepared, once you reach the retirement age.

For more information from the ATO on Super, visit here.

Image courtesy of scottchan / FreeDigitalPhotos.net

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