What is super and how does it work?
There are many ways to save for retirement. One of the most popular ways is superannuation, or super, for short. Are you familiar with the concept? If you are, then great. Stay tuned on our blog for more in-depth topics on super. If you are new to the concept, you are in the right place. Read on to learn about what super is, how it works and how you can benefit from it.
First of all, let’s get to know what super is.
In Australia, superannuation arrangements are managed by the government to encourage people to save for retirement. It is a tax effective way to accumulate money and is partly compulsory. This is how the government makes sure that people still have income even after they retire.
How do you get your super fund?
There are several types of super funds which you can choose.
A default super fund account is known as MySuper. Other types include retail funds, industry funds, public sector funds, corporate funds, eligible rollover funds, and self-managed super funds. Check with your employer to find out which super fund types you can choose.
Super funds are made up of three contributions: employer, personal and government contributions. Your employer pays an amount equal to 9.5% of your salary into your super fund account. This is where the employer contributions come from.
Personal contributions come from you. Yes, you. When you have extra income, like annual bonus or a side job, you can save your extra money into you super fund account. You can also ask your employer to deduct your monthly salary and transfer the amount directly to your super fund account.
Lastly, government contributions. This is a bonus from the government and the amount of contributions depends on how much money you make.
Is super an investment?
Yes, most super funds offer investment options. Different fund offers different services, though, so choose carefully. Compare the fees and features according to your needs. Bonus tips: you can have more than one super fund account. Sign up on a few accounts to test the waters and find out which one is the best for you.
How do I get my money back?
Your super can be withdrawn when you retire, or when you are sixty year-old. Your money will have grown by then and there are three options of withdrawing:
1. Lump sum
Withdraw your whole fund all at once
2. Regular income stream
Set how much you want to withdraw every month. This is like getting monthly salary from your own fund. The rest of your money that’s still saved in your account will keep growing accordingly.
3. Combination of lump sum and income stream
Some of your fund is withdrawn upfront, the rest will go to your account as regular income stream.
That’s a wrap for the basics of superannuation to get you started. We will discuss more about super in the near future, so stay tuned. Meanwhile, if you are thinking of getting some instant extra money in hands, apply for a short-term loan with low interest and flexible plans with SpotMe.