What is super and why is it important?

Superannuation is a type of long-term investment designed specifically to help you accumulate the savings you need to live the life you want in retirement. 

There are a few ways you can save money in super:

• If you’re employed, your employer should be contributing a minimum of 9%¹ of your salary into super on your behalf each year. These funds are known as ‘super guarantee’ contributions.
• You can also choose to forgo some of your salary in exchange for your employer agreeing to make increased contributions into super. This is known as ‘salary sacrifice’.
• You can make additional contributions to super from your after-tax salary. Just be sure not to exceed your annual contribution caps, as determined by the Australian Taxation Office.

To help ensure your superannuation savings are there for you in retirement, the government places restrictions on when and how you can access your super earnings. Generally you need to wait until you retire to withdraw these funds or until you reach your preservation age.

When you turn 60¹, provided you meet a condition of release, you can withdraw your super as a tax-free lump sum or convert it into a tax-free retirement income stream.² If you start withdrawing your super before you turn 60¹, you will have to pay tax on it, although part of it may be tax free.

What are the benefits of saving through super?

Certain advantages make saving through superannuation more tax-effective than other investments, which means your savings could grow faster. For example, any contributions your employer makes, as well as any returns you earn on your super, are taxed at a maximum of 15%, rather than at your marginal tax rate¹.

If you make super contributions on your own, you could also be eligible for special tax concessions.

Having your super locked away until you reach retirement ensures your savings will be used for one purpose only – to help you achieve your financial goals and secure the retirement you’re looking forward to.

Why is super so important?

As it’s unlikely that the government Age Pension alone will give you the financial independence you deserve for the 20 or more years you’re likely to spend in retirement, superannuation is key.

If you’d like to find out more about superannuation, or discuss strategies for maximising your retirement savings, you can use our online booking form to organise an initial, no-obligation consultation with a Commonwealth Financial Planner and start planning for a better life today.

 

• Important information
  1. Correct as at 1/01/2011.
  
  2. Applies to taxed funds only, i.e. does not apply to untaxed funds such as the Commonwealth Government Sector Super Scheme.
  
  This information is of a factual nature only and is not intended to constitute financial product advice. It has been prepared by Commonwealth Financial Planning Limited without considering your individual objectives, financial situation or needs. You should consider its appropriateness in light of your circumstances and consider seeking professional advice relevant to your individual needs before making a decision based on this information. Commonwealth Bank customers who wish to obtain information about retirement planning may do so by contacting a Commonwealth Financial Planner. Commonwealth Financial Planners are Representatives or Authorised Representatives of Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139, a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.