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How does superannuation work?
Superannuation is a tax efficient fund that you can put money into for your retirement. You automatically start putting money towards this account once you start employment (or via personal contributions), with your employer and the government also making contributions on your behalf when applicable.
Employers are your biggest and most convenient source of superannuation funds, since their contributions count AFTER they have paid your salary. The employer contribution rate is currently at 9.5%, but the actual number might rise to 12% in a few years.
The rules about accessing your super are very strict. For the most part, you can only access your super once you’ve hit your preservation age – generally 55 years old and beyond, depending on when you were born. It is possible to access your super earlier than that, but you need to fall under a specific set of requirements to do so.
So how much super do I need to retire?
The Association of Superannuation Funds of Australia’s Retirement Standard says that the average amount a single person needs for their super is around $545,000 AUD in retirement savings, and couples will need $640,000. There are plenty of super calculators online that you can use to check your total super savings, with some able to tell if you have enough to retire for the lifestyle you want. You can also consult the Standard itself for more information – it’s updated every quarter to account for rising expenses like utilities and spending habits.
How much super do I need, by age?
Your super rate can change depending on a variety of factors, but the most important factor that will decide if you have enough for retirement is your age. Ideally, the earlier you start the better your super will be, but there are guidelines that you can follow to best grow your super no matter your age:
30s
You often settle into a career or lifestyle at this stage, which can drastically set the tone for how much you’ll put in your super from this point onwards. High earners will want to take advantage of the lower tax rates to pump as much money into their supers as they can, while others can access other ways of super contributions like the Federal Government Contribution Scheme.
40s
This age is when people often pay off long standing finances such as mortgages, giving them more financial freedom to spend their money how they like. At this age, concessional contributions are your best way of increasing funds towards your super. You won’t be spending as much on it at this age, but it’s still important to keep up a regular contribution.
50s
You have to be on top of your accounting for a smooth super rate at this age. With only five years before the first age that you can legally access your super, it’s tempting to slow down contributions and just wait for the money to come in. However, every last bit will always count until you finally access your super fund, so don’t let up!
60s
If you’ve reached this age and still have not withdrawn from your super, congratulations! You will most likely have a liveable fund for you to withdraw from. This is also the age where you should get your affairs in order so your super can still be beneficial after you pass away, like setting up your death benefits. It’s a little morbid and involves a lot of paperwork, but it can save your loved ones a lot of work if it happens.
Save today, relax tomorrow
While rates and standards can change over time, the most important thing to make sure that your super is in good shape is consistency. With regular contributions and some patience and planning for the future, you and your loved ones can relax and retire in comfort.
**This advice is general in nature and is now written by a finance professional. This article does not take into consideration your personal circumstances. Speak to a finance professional before making any decisions.**
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