We covered how to go from full-time to part-time employment as a stopover on the path to retirement in the previous article in the Road to Retirement series.
We describe how a better retirement can result from an understanding of super in Part Five of this article.
What is super?
Your super is a personal savings account that you keep during your working years in order to build up a retirement income that you can use when you get older. Even very small sums of money can grow into enormous assets because they are merged with other funds in a much larger pool of savings that is invested over decades.
Your employer is required to pay 11.5 percent of your pay into your superannuation on your behalf. This will rise to 12 percent starting in July 2025. However, your employer is not obligated to boost these savings. You can choose how quickly or slowly your retirement fund grows.
Depending on whether they own a property or not, many Australians are disengaged from their super, which may be their greatest or second-largest financial asset. This is the case for several reasons. Some people delay taking responsibility for super till that distant day when they may quit their jobs since they feel powerless about it.
Although it is rather prevalent, this approach to super is far from ideal. It also implies that if you do not actively make this money work as hard as it can for you, you might not be able to maximize your savings.
You can make additional contributions from a young age, make sure your investment settings align with your life stage and risk tolerance, and continue to make wise decisions regarding your super at specific turning points both before and during your retirement journey. Since you are ultimately in charge of your own super, how can you take charge and take charge?
The levers that you can control are:
What should be the primary focus of pre-retiree education? Is there a quick method to learn super so that your "pay package" at retirement is as large as possible?
There are three key things pre-retirees should be aware of about super. They are:
Assessment of performance
The transition from saving to spending
How super keeps becoming bigger even after you start spending
Recognizing your balance and the performance of your funds
Start with your most recent balance sheet, which is probably for June 30, 2024. You can review your investment settings and the performance of each fund for the relevant fiscal year with this statement. Next, make sure you can access this account online. It is time to set this up if you have not already; the benefits greatly exceed the little time needed. You may now view the growth of your balance over the last six months, ending on December 31, 2024. Your super funds might have increased in three key ways:
Concessional or pre-tax employer contributions, your personal contributions (such as salary sacrifice or additional post-tax contributions up to the cap), or earnings—the amount by which your money grew as a result of overall returns on investment. Most people find it very comforting to know that their fund is doing well.
One excellent method to make sure your money is growing as gradually as possible is to use the Compare the Pair tool.
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