A good retirement plan can be the difference between enjoying the vintage years of our lives in comfort and being doomed to continue working into our sixties and seventies, while all our friends are enjoying countless holidays and boasting about their newfound hobbies.
I know which position I’d rather be in! Do you?
As the thought of retirement looms, I’m immersing myself more and more into the world of financial planning (never thought I’d say that). Did you know that the success of a retirement plan hinders on how well you’ve managed your superannuation? While many Australians will tune out upon hearing the term, or stop reading when the see the word appear, I’ve come to love the idea of a superannuation.
Let me tell you why…
You get to sit back while the experts do the hard work
Really! This is basically how it works:
- You and your employer contribute money.
- Your contributions get pooled together with numerous contributions from other individuals and companies.
- This pool of money forms a fund, which is managed by a fund manager.
A fund manager’s sole purpose is to find the best investments out there, to increase the value of your fund; thus, improving your wealth. Meanwhile, you don’t have to do anything other than continue to contribute and check in from time to time – How easy is that?
You pay less tax – meaning there will be more money in your pocket
Believe it or not, the government is a big supporter of superannuation funds and they’ve been kind enough to give us some tax breaks as a result. If you contribute more of your salary, in the form of salary sacrifice, you’ll be taxed at only 15%, representing an impressive saving, especially for higher rate taxpayers – winning!
Additionally, as the fund grows, it gets taxed at a much lower rate than if you would have made the equivalent investments yourself.
To summarise: Superannuation means less tax!
You won’t be able to access your fund until you retire (without being penalised)
I hear you ask, “How on earth can this a good thing?” But, I think of it this way… if there’s money to spare at the end of the month, I know I should save it for a rainy day. But I usually don’t…
Whether it’s home improvements or a much-needed family holiday, I’ll find a way to justify my spending habits. My willpower gets beaten down, then, with the expense comes the guilt. You know exactly what I mean, don’t you?
Having your funds locked away until retirement reduces your need to be disciplined. It means you don’t have to be fighting temptation with willpower.
And, how nice will it be when you do retire, knowing you have that treasure chest of a pension fund waiting for you?
Are there any drawbacks to superannuation funds?
Despite all my enthusiasm, I understand the stress you’re under to get things right. With questions such as, “How much should you be investing?” “What’s the right fund for you?” In short, there are no simple answers and each of us has a unique set of circumstances.
That’s why the best piece of advice I can leave you with is to talk to a financial advisor. You ideally want someone with the expertise to give you the right set of solutions for your situation.
Get inspired. Contact Inspired Money in Perth today and get your superannuation onto the road to a successful retirement.