What is super?

AMP has shared with us this video that will look at what superannuation is. You can watch the video here or read the transcription below.

My name’s Callum and I work at AMP. The thing with super is that nearly everyone that has worked has it. Superannuation is a long-term savings account whereby Australians can save for the long term, save for their retirement. For many Australians it will be the largest asset that they have when they come to retire outside of their family home. As such, making choices around how it’s invested, what sort of advice and assistance people are getting can make a big difference to how much people have in retirement.

To make superannuation savings attractive super money is normally taxed at a lower tax rate than many people’s marginal tax rates, so over the long term those savings can build and build year on year, and just like compounded interest, you could end up with much greater savings over a long period of time by having reduced tax in the superannuation environment.

When you join an employer you have the choice to take the default funds that the employer offers or you can usually choose your own super fund. When you change job you can continue to have your super monies paid into that fund and it can stay with you for life.

Everybody is different and there are a number of choices that can be made with regards to super. In particular, choosing where your money is invested, is it invested in more conservative options such as cash and term deposits, or is it invested in share markets, property funds, or specialist funds such as infrastructure.

An important question for many people is how much money they need for retirement. AMP has a super simulator which can assist in understanding whether you’re on track for your retirement savings goals. If you’re not on track the super simulator can assist you in understanding the impacts of making additional contributions to super to help boost your super savings.

There’s a number of factors that make up how much you have in your superannuation when you retire. For example: how much money you put in, how long that money has been invested, what kind of investment returns you receive, and also what fees come out. An important factor is how long that you’ve had the money invested. Similar to a bank account, if you put money in early it’s got more years to compound and grow. Superannuation is better if there’s more money earlier than trying to shovel as much money into it in the last five years.

Most people compare one fund to another by looking at a couple of things. Fees and costs are always at the top of everyone’s mind. Other things are performance, remembering that past performance is not a reliable indicator of future performance; and what other options the account will offer, such as the range of investment choice and does it come with insurance; and is the insurance provider one that you can trust. There’s a lot to consider, and I think it depends on who you are as to which super fund is better for you.

If you would like us to review your personal financial plan, please contact us for a complimentary initial consultation.