Self Managed Superannuation Funds have emerged as a powerful tool that provides individuals with greater…
Superannuation is a must-have no matter where you are in your career or how close you are to retirement. It refers to the retirement nest egg you receive after you retire. Contributing to your superannuation fund systematically and consistently will help you meet your retirement savings goals and fund a better life once you stop working.
Read on to learn more about the importance of superannuation for retirement.
The Role of Superannuation in Insurance
Superannuation Assists in Long-term Retirement
When you retire, you will lose access to your primary source of income – your wages or salary. It is critical to have enough money to last a lifetime. A large proportion of Australians grossly underestimate the financial requirements of retirement.
Superannuation Can be Boosted By the Age Pension
You’ve earned the right to relax and unwind after years of hard work. You might be planning a retirement trip or you may be interested in exploring new hobbies, taking new classes, or joining other clubs now that you are no longer employed, however, the superannuation you have accumulated may not be sufficient to achieve these goals. This is where the Age Pension can help.1
The Age Pension is a benefit provided by the Australian government to qualified individuals who meet Asset and Income Tests set by Centrelink. As at September 2022, the maximum basic Age Pension per fortnight is $900.80 for singles and $1,358 for couples. In this situation, eligible recipients can use their Age Pension to supplement their retirement funds, increase their retirement income, and improve their quality of life in retirement.
Superannuation Gives You Time to Save Money
Superannuation savings are often recognised as one of the top long-term investments due to government tax breaks. Superannuation is a term that relates to specific retirement savings. Every dollar saved for retirement could make a difference in the long run.
Even if retirement seems far away, you should commence a superannuation strategy as soon as you start your career and review it regularly to ensure that you are on track to meet your long-term objectives. This should be done even if retirement appears to be a long time away.
If you conduct a superannuation search via MyGov, you will be able to locate and recover any lost or misplaced funds in your superannuation portfolio.2
Superannuation Offers Tax Benefits
To encourage residents to save for retirement, the Australian government offers tax breaks on contributions to and earnings from superannuation accounts. Both your employer’s contributions and the earnings from your investments are taxed at a rate of 15%.
Additionally, if you salary sacrifice a portion of your pre-tax income into superannuation, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.
The Role of Superannuation in Insurance
Individuals who are members of superannuation funds are commonly covered by insurance. Insurance protects a member and/or their family financially if they become disabled or die before their time. Some members receive automatic insurance when they open their super account, whereas others may need to apply for insurance – it will depend on your super fund.
Here are three types of insurance you can fund with your superannuation:
1. Life Insurance
If you die or are diagnosed with a terminal disease, a lump sum payment will be issued to your superannuation account. The balance of your super account will also be distributed to your nominated beneficiaries or the person you have chosen as your legal representative.
2. Total and Permanent Disablement (TPD)
If the trustee of your super fund affirms that you will not engage in a lucrative profession for which you are entitled and that you are unable to work as a result of a total and permanent disability, your lump sum TPD insurance payment will be deposited into your super account. You can then apply for the funds to be paid to you before your preservation age under a condition of release.
3. Income Protection
Income protection, also known as salary continuance insurance, is ideal for people who are injured or ill for a prolonged period and are eligible for replacement income. Recipients who successfully claim against their policy will typically receive 70-75% of their pre-disability pay for a pre-determined period or until they can return to work.
In some circumstances, super fund insurance is available as part of a group policy, which is generally less expensive than purchasing insurance on an individual basis. However, the cover can be less comprehensive than policies owned personally.
Your super balance, rather than your after-tax income, will be used to pay your insurance payments. You are not required to pay premiums, but you must ensure that your super balance is adequate. You can make additional contributions to your superannuation plan to cover insurance costs and preserve your retirement assets.
Start Boosting Your Superannuation for Retirement
It’s never too early to start saving and investing for the future. Thankfully, you have superannuation to help you achieve your retirement goals, whatever they may be. Through dedication and planning, you can live your best life.
Are you looking for specialist superannuation advice from a professional financial adviser? Coastal Advice Group is here to help you achieve your dreams and goals. We have offices located in Newcastle, the Central Coast, Sydney, Port Macquarie, and Byron Bay. Call us or book online to secure your complimentary first appointment with us today and get started!
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.