BASICS OF SUPERANNUATION
Mention superannuation and most people’s minds conjure ideas about complex contributions and complicated, ever changing rules. However, like it or not, for the vast majority of people Superannuation will become their most valuable future investment asset. If managed efficiently it can provide you with a profitable and tax effective way to cater for your retirement.
All of this is not as difficult as you may think. Once you understand a few key concepts it is easy to see the potential of Superannuation to become a long term savings device, over the management of which which you have an enormous amount of control.
What is Super All About?
Superannuation is a regular payment made into a fund by an employee toward a future pension. Basically, it is the answer to the question “What will you do for money when you are retired?” Most people are limited to the options listed below
- Earn an income by investing the capital you have acquired throughout your working life
- Receive a full or part pension provided by the government (if eligible)
- Living off money saved throughout your working life
- A combination of the options listed above
There are several difficulties associated with some of these options. Firstly, you may not have saved a large amount of money that will allow you to live comfortably throughout your retirement. Secondly, a reliance on a pension means you are dependent on a very small amount of money as your main source of income (approximately 25% of the average wage). The most effective way to ensure that you are adequately provided for throughout retirement is through your Superannuation contributions; both voluntary and compulsory. The government provides a range of schemes and incentives can help you maximise your Super’s potential.