If you live and work in Australia, the chances are good that you already have a super account, whether you realise it or not. A superannuation account is basically and government-operated retirement savings fund to ensure that you have the necessary funds to live on when you retire.
If you live and work in Australia, the chances are good that you already have a super account, whether you realise it or not. A superannuation account is basically and government-operated retirement savings fund to ensure that you have the necessary funds to live on when you retire. These funds are set up in a special super fund and can only be accessed when you retire or under extreme emergency situations.
Even if you are years away from retirement, it is vital that you understand how your super account works in order to receive the maximum benefit from it when you retire. Below is a closer look at how a super account works.
How Is Your Super Funded?
You super account can be funded three separate ways, including by you, by your employer, or through governmental matching funds. Below is a look four ways your super account is funded.
Every employer in Australia is required to pay a minimum of 9.25 per cent of their employees’ regular salary to the employees’ super account. This percentage is set to gradually increase over the next few years to a maximum of 12 per cent in the year 2019.
Employer Matching Funds
Some employers also offer their employees an additional benefit of matching contributes, up to a set amount, made by their employees to their own super account. These funds are paid into the super fund on a regular basis along with the employees’ contribution.
You can also make regular payment towards your own super account to help you save for your retirement. You can either make these payments directly to your super account of have your employer deduct regular contributions from your pay cheque and have them directly deposited into your super account for you.
If you are a low or middle-income earner, you may be eligible to receive matching superannuation funds from the government. The amount of your co-contribution funds will depend on your annual personal contributions and your income, but can be up to $500 per year.
Selecting the Right Super Fund
You will be able to select what superannuation fund you want both yours and your employer’s contributions to go to with each payment. You will need to complete a Standard Choice Form issued through the Australia Taxation Office (ATO), and submit this form to your employer. Without this form, your employer will make the choice for you. You should evaluate each super account available to you before making your final decision. It is also recommended to only maintain one super fund account to avoid paying double on record-keeping and maintenance fees. If you currently have two accounts opened, it is best to consolidate them into just one account.
What Happens at Retirement?
Once you reach retirement age, you will be able to request the funds that are in your superannuation account. You can receive these funds in three different methods, including in one lump sum, regular monthly payments over a set period of time, or some combination of both a lump sum and regular payments. You must be sure to carefully select how you want these funds to be distributed because it will need to support you throughout your entire retirement.
Understanding you retirement now, will help you plan better for your future. It is important that you keep track of your super account through the years and ensure you are saving enough money back to support you during your retirement. It is also advised to start making personal contribution into your super account as soon as possible. These contributions will add up over time and help you live a comfortable retirement. Get additional tips on retirement here.
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