Self Manager Superannuation Fund (SMSF) life insurance is the go-to insurance for trustees. SMSF trustees have the duty of care to consider Life Insurance for their members. However, the Federal Government has estimated only 13% of SMSF members have any Life Insurance cover – exposing an alarming risk to the community.
Avoid leaving your superannuation fund members in the lurch by opting for adequate cover through SMSF insurance. SMSF Life Insurance provides a lump sum payout in the event of the insured’s death or terminal illness. So make sure your members and their dependents can continue living a comfortable life.
The superannuation fund is witnessing a sharp rise in Australia, and trustees are directed by law to review the insurance and look after members’ insurance needs.
Taking out Life Insurance through your superannuation fund is different from taking out Life Insurance as an individual – the fund acts as a mediator between your insurance provider and SMSF members and beneficiaries.
Since some insurance companies do not allow multiple insurance policies within the SMSF and outside of it, you should speak to your insurance specialist about ascertaining how the SMSF and life insurance will work before you sign on the dotted line.
Life Insurance will pay out a lump sum in the event of the insured’s death or terminal illness. As an SMSF trustee, you have the duty of care to determine whether SMSF members need Life Insurance. As a superannuation fund trustee, you are responsible for deciding whether SMSF members need Life Insurance. Taking out Life Insurance as part of your SMSF can deliver a significant tax advantage, as super fund premiums are tax-deductible if you’re self-employed or if less than 10% of your income comes from an employee position. These circumstances make the SMSF and Life Insurance combination an attractive option for self-employed business owners who manage their super.
Tax benefits related to Life Insurance apply to the term Life Cover, TPD & Income Protection. While life insurance through SMSF is generally more cost-effective than a standalone life cover, some tax is payable when the insurance comes under super funds.
View our table here to compare the differences between taking out Life Insurance as an SMSF or as an individual. For general information on Life Insurance, check out our helpful guide.
In case you’re totally and permanently disabled and unable to work again, Total and Permanent Disability insurance (TPD) provides a lump sum payment to cover the costs of rehabilitation, repayment of current debts, and the cost of living for you and your dependents. And, you can only get Any Occupation TPD cover with your superannuation. So, anyone with an ‘own occupation’ definition may fail to get disability cover. But, your self-managed super fund comes to the rescue again in this type of case.
And there are ten essential benefits to superannuation funds that can help you avoid severe financial hardship later in life. Besides the fact that you will have an investment or two to fall back on, other benefits make investing some of your hard-earned money into a superannuation fund worth your while.
These benefits key benefits include:
1. Cutting Your Australian Taxation Office Income Tax Bill
A salary sacrifice arrangement involving employer contributions allows you to exchange the usual tax rate you would pay with a super contributions tax rate. At a 15% lower cost, you can save on the monthly tax you pay against your salary, benefitting from more after-tax income. You can also make individual contributions if your employer disagrees and claim a tax deduction against your payment as of July 2022.
Also, you can claim a more significant tax deduction with a higher annual contribution. You will have five years to take advantage of this provision, but if you do not manage to use all the money in your super account, you will be allowed to carry the total over into the following year.
2. Continued Investment Insurance
The right fund can help your investments at any stage. For example, starting a new job doesn’t affect your insurance. Also, you can continue with your range of investments if your super funds feature high-level insurance products. And if you stop being a super fund member, you can switch to a personal policy and pay separately.
3. Bankruptcy Protection
If you were ever to declare bankruptcy, you would be protected from creditors who may be looking for repayments. Therefore, leaving your retirement savings in a super fund protects your money from being taken without consent. This feature is especially great for small business owners who may have invested large sums of money into shares or property and are looking to retire without financial strain.
4. Ensuring Safe Financial Decisions
Death can have a profound effect on family members looking for a payout. The Binding Death benefit nomination protects unlawful allocation of your retirement fund when you die and ensures that the right people inherit your money.
This requirement includes everything from cash in your savings account to investments. There will be no possibility of family members contesting a will to claim from your funds if you have not appointed them as beneficiaries. Therefore, they will not be able to get any shares of investments you may have or any properties still under your name.
5. Australian Government Funds
You could qualify for a co-contribution from the government if you have made non-concessional payments towards your super fund account. It is tax-free cash paid to your super fund, which supplements your retirement savings.
6. Hassle Free Medical Insurance For most super funds, you will not need a medical examination to qualify for total or permanent disability. The cover will come in handy for anyone who may not have been able to afford the cover. If you have any pre-existing illnesses that disqualify you from health benefits by an insurer, this will help to give you peace of mind.
Certain health conditions are hereditary, and you may not be able to control them to qualify for benefits. For example, finding cover for individuals with diabetes or heart conditions can be challenging, which is a bonus to consider when joining a super fund. This illness issue is why your super fund will be an essential asset.
7. Pay Less Tax on Your Investment Returns
You can earn tax savings on a higher income. Your super fund is generally tax-free once you retire, but any investments will be taxed at a 15% lower rate with capital gains of 10% if the assets are under ownership for more than a year.
8. Cheaper Insurance Cover for Members
Insurance through your super fund is often cheaper because insurance companies buy bulk policies for their members. It is a cost-effective way to get insurance and enjoy the full coverage guarantee. Furthermore, it is easier on your budget and your overall investments.
And although it does take a bit out of your retirement savings, you won’t have concerns about how you will pay the premiums. If you don’t have the contribution for a particular month, the benefit will cover your premiums, and you won’t feel the bite in your monthly budget.
9. Invest in More Considerable Assets
More significant investments are better accessible when you collaborate on investments with other members. Being an individual investor can make it challenging to access assets, but group investments are safer for corporations or companies. For example, you may have had your eye set on a large corporation or property, so the help of other investors will ensure that you have the opportunity to invest.
10. Tax-Free Income in Retirement
Super guarantee contributions mean more money later in life, especially when you also pay more than the minimum amount to the default fund than ordinary time earnings. Also, your super accounts usually pay out around the age of 60, tax-free, but there are limits to the amount of money you can transfer into a tax-free super account. Retirement superannuation funds may be limited, but here are two things to consider:
Consider these benefits to earn back the money you have sacrificed to save for retirement. If you and your partner pay super, it will be even more lucrative when reaching your 60s. You will be set for a comfortable retirement that can cover your lifestyle and save you extra money. Also, should life not go according to plan, you can discuss early access to funds. However, most people avoid early super fund withdrawals rather than making super contributions to increase their later income.
Self-employed? Life Insurance can be considerably more expensive for you than for a company employee. This expense is why it’s worth shopping around for superannuation fund providers who give their customers bulk discounts.
Group Discounts? Similar to a large super fund that provides policies at wholesale cost to their members, some SMSF providers can negotiate bulk insurance cover deals for SMSF members. For a pocket-friendly SMSF life insurance cover, compare SMSF life insurance quotes and features from several providers.
How to consider what’s best for you – Term Life Cover and TPD:
Superannuation is a pension plan that employers create for their employees. It works in favour of the employee, where money is paid into a super fund for the employee’s retirement as a forced form of saving. The employer deposits superannuation funds that grow with interest, and the employee has little to no tax implications. You can speak to us or the Australian taxation office for any tax queries. Employees can also use their wages to contribute to their existing super account and increase the financial outcome once they reach retirement age.
Once an employee becomes eligible, the superannuation fund will pay out the benefits from their super accounts. The benefits are scheduled, unlike a retirement investment portfolio where these are performance-based. The age to receive benefits is 60, according to fund rules, and you must be fully retired. This term is called being superannuated and deems the employee to be of proper age.
The superannuation fund you choose to save money with can also assist you with investments for a more comfortable retirement. And with many portfolios, your options are endless, so you can start with a minimum of 20% investment and increase it as you get closer to retirement.
Your employer can ask for a stapled super fund for new employees from 1 November 2021 if employees don’t choose a stapled super fund. In addition, the Australian taxation office (or ATO website page) may need to provide you with their ‘stapled super fund’ details. The stapled super fund is a super account linked to an individual employee so that it stays with them as they change jobs.
Superannuation makes it easier for superannuation fund members to keep track of their money through investments. And when it comes to life insurance, you will be covered for illness, disability, and job loss. Life insurance, however, will cover you in the event of your death. SMSF will pay the premiums and, when you are eligible, will cash out to your beneficiaries.
The more you know about interest rates and benefits, the sooner you can start saving for a comfortable retirement in your superannuation fund. So, the sooner you know about your retirement and superannuation potential, the better. If your goal is to retire by the time you are 60, you would need to begin in your 20s. If you’re wise, you could make this one of your employment benefits early in your career.
Super funds are there to make it easier for you to work on your retirement. It is a set superannuation investment design comprising various portfolios clients can use to invest their money. In addition, there is the option to buy shares or properties with funds from which the investor can withdraw after a certain period. Trying to navigate all this information is complex, so financial advice may help improve your understanding.
Part of this understanding involves an employee’s ordinary time earnings. Below you will learn what superannuation is and how you can benefit from investing.
Setting money aside for a rainy day is no longer enough. Medical expenses and living costs rise annually, and the chances of covering health benefits without a steady retirement plan are slim. With the current interest rates and elevated living costs, you need to prepare for the little things that life throws at you.
Research shows that six out of ten people find saving for retirement a big problem when weighing the costs against their daily living expenses. It doesn’t make sense to many to set aside funds they need for over 20 years when they think they cannot afford one fund super account, let alone several super accounts.
Start the journey into your investments by looking at your monthly expenses. Knowing what you are earning and where you are possibly throwing money away with unnecessary spending can help you prioritise your super investments over minor things like takeaways.
Downgrading is an excellent way to ensure that you can cut costs to save money from your monthly salary. Let’s look at how you can downgrade to make room for super monthly payments into your super account for a secure retirement:
Giving up a large home and moving into something more economical is a big start. You can get a house that costs less to maintain and use the extra money to pay towards your superannuation contributions for a better retirement. You can also use the after-tax income funds from the sale to put into your super fund account if you have never paid anything. This is ideal between your 40s and 50s. See it as a superannuation investment based on ordinary time earnings that will generate a superannuation guarantee in your mature years.
Buying a fancy car when you have just started earning a decent living is a great way to reward your hard work. However, as time goes by, fancy cars become expensive to maintain. Insurance becomes more costly, and so does the cost of driving it. Consider a smaller vehicle that is easier to maintain. You will still have something reliable, but you will cut out the other expenses that could go towards your super guarantee contributions.
A hospital plan covering everything is essential but will be more critical as you age. It can be hard to pay for the more necessary medical expenses when you are too old to work and do not have a steady plan in place. Speak to your health care advisor about ways to cover you for important hospital visits instead. It would make more sense to be able to care for yourself when you are older. Having money in your super accounts will make retirement less worrisome and possibly save you from severe financial hardship in your twilight years.
It may seem unfair to work hard and not be able to spend some of your money. Unfortunately, not everyone has an excess amount of cash to spend, and the rise in social demands can be tempting. Many people realise how much money they waste until they cut things they don’t need. For example, a lovely holiday or shorter trips can be made annually instead of monthly. Save the money and use it during your retirement for one long holiday instead.
SMSF isn’t just a simple retirement fund but a portfolio of investment options.
These investment options include six excellent portfolios: single asset, balanced, growth, high growth, conservative, lifestyle, and socially responsible. These options are the basics, but more are available if you choose to expand your investments
later. Let’s look at these six options and how they can work for you:
This super option is a pre-mixed investment between growth and defensive assets. Most people would consider this high risk and is known as the default option by super funds. Not all super funds have the same balanced option, although the general allocation would be 65-75% put into your growth assets and the remaining 30-35% allocated to your defensive assets.
• High growth
There are potentially high returns on these options, with 80–90% of your super balance allocated to growth assets like shares or property. The only time 100% of the option will be allocated to the fund will be when there is a high-growth investment opportunity. You will need to leave your investment for long periods, usually up to 10 years, to be able to see the growth.
This period would be the ideal option if you have invested in a property and have no need for returns immediately. However, if you have bought shares in a smaller business or an unstable market, this would not be the best option because you can’t see the returns for under seven years.
This extra step for investment is age dependent. It is based on the period you invest, and your age determines its growth. The primary change occurs as you get older, and the risk level increases along with it. Investing in this option when you are much younger is advised because you will have time to recover from high-risk incidents.
For example, if you decide to buy shares from a recognised company or invest in the stock market when you are in your 20s or 30s, you will have the time to ride out the errors of your investment choices far better than someone who decided to invest in their 50s or 60s.
The conservative option is for you if you are close to retirement and want a low-risk investment option. This investment will ensure you can safeguard your retirement by investing some of your money. There will be little cost to your retirement savings, with only 20-30% allocated to shares or property. Whatever remains can be used for bonds, or you can keep it in a low-risk savings account.
• Socially responsible
Although not as high risk as the balanced option, this is still considered a high-risk option. The assets you invest in must be ethical ones and do not include any endangerment products. Your investments would not involve companies that pose a general danger in the long run, like weapons manufacturing or pharmaceutical testing companies.
Socially responsible portfolios often have high returns despite the risks, even though they are expected to perform poorly in the stock markets. The chance of a high recovery is likely even if this option is considered high risk.
• Single asset classes
The great thing about this option is that it allows you to invest how you want. You can build your investment portfolio by selecting individual asset classes. This choice will enable you to avoid the pre-mix investment option by going with a super fund that gives you the freedom to choose for yourself.
You can select general shares or property classes to invest in, but you won’t be able to choose individual investment options. You also cannot determine the exact property or shares. You can only allocate percentages to specific classes. For example, 50% for property, 30% for international shares, and 20% for local shares, and the risk is considered high.
An SMSF can make retirement more manageable, and you can manage how you receive your funds. If the trust deed allows for the choice of payment, you are of the right age to receive it.
It can often be challenging to cut out the significant events in your life when you need to consider using the money in 20 or 30 years. However, those events are happening now; without planning, they can consume your funds and leave your savings dry.
As hard as it may be, you need to think about your future, and with superannuation or a steady retirement plan, you can grow old without fear of being unable to care for yourself. Many pensioners stop seeing their children and grandchildren because they do not have the money to travel or are too frail and do not have the super funds to take care of their needs.
Below are the different kinds of retirement funding options you can look at to avoid being part of the statistics of pensioners who grow old alone because they have no money.
As a trustee, you manage the fund account where the money is paid. Your employer is lawfully required to give a 10% contribution towards the fund based on your salary. Most employers use a company that can manage all their employee’s capital, and you may have the option to choose which investment options you want. If you are unclear about the portfolio you want to invest in, the company will select one for you based on your contribution and the desired outcome after retirement.
Most organisations allow you to carry over any payments that have already been made if you leave your employer. There is, however, a fee for the superannuation organisations to manage the funds. For this, you will need to know who the super fund organisation is to avoid paying excess fees when you start your new job. This is also an excellent way to familiarise you with the taxes you must pay before and after retirement.
There are two options for you to be able to get your money. First, you must be 60-64 and retired to access your money. If you decide that you would like to continue with additional work, the earliest age you will be able to draw money will be 65 and older.
Most people view retirement as the end of the road for their careers. It is when you officially stop working and spend the rest of your day enjoying the money you saved while employed. But unfortunately, not everyone has the luxury of being able to spend that money because most haven’t saved for it. This saving also depends on the amount of money you earn while working and your lifestyle expenses.
It will be easy to retire quickly for someone who may have made a living through a small business where they made millions. However, it would be much more complicated if you were a government employee and earned an average salary. Then there is also the waiting period for when you will be able to access your money.
The ideal thing would be to look at the money you spend daily if you are earning an average salary. The lower your expenses, the easier it is to save. We often hear of people who live frugally, but the bonus is a comfortable retirement. Living this way and not having retirement funds would mean you need to cut out all debt if the government offers you retirement support.
Some of the things that are high on the list of things that pensioners wish they had the money for are:
• Home renovations to make retirement easier. If your home is safe for you to move around in as you get older, you will likely be able to live better. Many pensioners have accidents in their own homes, and renovations can prevent that.
• Landscaping is a dream for anyone fortunate enough to grow old with a partner. To sit in a lovely garden and enjoy the rest of your years is something few can do. Landscaping can be expensive if it is being done to accommodate the elderly. Some extra cash will be an excellent way to invest in your home, and planning will require a steady retirement plan.
• Education is something that all parents want their kids to have. The idea is to give your children more options than you had. Doing so, however, requires funds, and with a good retirement payout, you can send your children to university or finish their existing studies.
• Travelling when you are older is a beautiful way to enjoy all your hard work. You can take the opportunity to see the places you only dreamed of or visit family you haven’t seen in a long time. You can use this as why you need to work on your retirement fund.
Whatever the reason may be for why you need to think about your retirement and the plan of action you are going to take, make sure that you are well informed about the options you can explore before you set money aside for your old age.
The great news about this is that there are no restrictions. The bad news is that you will not be able to access it before 60 years because it is illegal. You will not be allowed to borrow money from your fund. Money cannot be transferred between assets or borrowed from other fund members. There are profound implications for anyone who breaks the rules or attempts to pass the law.
By breaking the law, you lose your position as a trustee on any investments. In addition, you can face significant penalties disqualifying you from assets. You may require financial advice if you are unsure about restrictions.
A condition of release needs to be satisfied if a member of the fund would like to release funds. The fund can pay out only a particular amount with restrictions on certain benefit forms. This restriction does not include rollovers, provided that everyone adheres to fund rules. You will be taxed at the marginal rate if you do not meet the release conditions.
Fund managers can pay out non-preserved benefits without any previously satisfied requirements. This decision can also include special employer termination payments, which have become part of the category since July 2004. In addition, if the member meets the condition of release, the fund can forgo the cashing restrictions. Thus, members can release benefits under super laws but not under self-managed super funds.
Let’s take a look at some of the common reasons why members choose to release payments:
Although these rules are strict, there are exceptions where there is no choice but to release the funds to the member. The circumstances need to be exceptional because they overlook the age factor of a member when the funds are being released. Should you have no choice but to apply for early release of your funds, ensure that you discuss the tax implications and possible fees with us or your fund manager.
Here are a few of those cases where the rules will not apply:
These are the only circumstances where a member can have early access to cash before age 60.
To transition into retirement means slowly stopping working full time. A process must be followed when you shift from working full time to retirement. You will be allowed to access some of the cash in your super while still fully employed. This is the right time to reduce your work hours and supplement your income.
That way, you can push money into your super and avoid tax simultaneously.
You can start a transitioning pension where you can still receive your employer’s contribution to your fund. You can transfer some of your money into a tax-free account-based pension. You will be allowed to pay over the 10% minimum requirement for each year starting on 1 July annually. Just make sure that the trustee deed will enable you to do so.
Transitioning to retirement can be complicated if you do not know much about finances. Therefore, speaking to a financial adviser is suggested to assist you with making the right choice at the right time.
Retirement After the Age of 60
It is common for older people who may not be ready for full retirement to continue working. You may have a part-time job that you are reluctant to give up after you retire. There is a solution that will assist you in making the transition smoother when you give up both jobs.
You can cash in on all benefits you have accumulated until that time as long as these are unrestricted. Non-preserved will not be allowed to be cashed out under the exact condition of release. If you wish to cash out these benefits, a new condition of release will have to occur.
What Happens After You Turn 65?
After you turn 65, you will be eligible to cash in your benefits whenever you want. There will no longer be any restrictions, and the benefits can be paid in a lump sum or as a monthly income stream. Once you reach a certain age, you will not be forced to draw your super even though your benefits remain in the fund. You can leave the benefits there as long as you want.
If you are retrenched unexpectedly, you can draw from your benefits under exceptional circumstances. For example, members can draw unrestricted non-preserved benefits on request. And if you are terminally unemployed, you still have options with your fund if you comply with the following:
If none of the other conditions has been met, the member will be allowed to access the fund without penalties.
If you are forced to cease employment because of illness or permanent disability, you will be allowed to cash out your benefits. In addition, if you are unable to participate in any on-site training or educational courses, or you are unable to perform physically in the workplace, you may cash out your benefits.
If the illness affects the work, the member will be allowed to cash out, and no restrictions apply. However, the benefits will be paid out of the insured benefits if the illness is temporary. The same applies if the member is mentally or physically ill temporarily. There is no need for the employment to end permanently if the member is due to return to work after a certain period.
Sick leave benefits are the only benefits that can be paid to the member if they wish to continue their employment. It will be paid as an income stream until you regain employment. In this situation, they do not have to take any benefits prematurely.
Financial statuses change often, and people experience severe financial hardships. If you cannot meet your financial needs, you will be allowed to release some of your benefits. If you have found yourself in this unfortunate circumstance, you will be able to release benefits to ease some of the financial loss.
If you receive support from the government for more than six months, you will also be allowed to cash in your benefits. The sum can be no more than $10 000, and there has to be a balance remaining in the fund of $1000. Only one payment will be permitted per annum.
No cashing restrictions apply if the member has been unemployed for more than 39 weeks and the government is the only source of support. If the application for benefit release to the trustees is made within this period, the member faces no cashing restrictions.
If a member cannot meet expenses and the governing rules of the funds allow for benefits to be released, then the benefits will pay a lump sum to the member. The amount of super will be determined by a member’s needs and paid accordingly. These circumstances need to be evaluated to determine whether the members are genuinely impoverished and lack funds.
For a terminal illness to be considered, you must be examined by two different healthcare officials. First, they would have to prove that the disease is life-threatening and that there is a chance the member could pass on over 24 hours. Once confirmed, the super account balance can be paid out in a tax-free lump sum. The money will then go to the member appointed as the beneficiary.
The first home super saver scheme is ideal for first home buyers. The system allows you to save money for your first home. It is a voluntary contribution that is either concessional or non-concessional. Members can request a withdrawal release when they are ready to receive the amounts on their FHSS.
If the request is successful, the member will receive the release with an authority statement form which needs to be completed to release the amounts. There are ten business days in which to complete the document. Provided the benefit rules are adhered to, a tax deduction is made from the release amount except for settling outstanding Commonwealth debts, and the payment will be made.
Do I Need a Financial Adviser?
Hiring someone to talk to you about money may seem like an expense. Financial advisers, however, do a little more than just talk about money and could prove crucial for your retirement. SMSF is more successful when you take the time to speak to someone about the ideas you have for your retirement.
Hiring a financial advisor to sort through your current finances and work out a plan can save you thousands every year. Your financial advisor can be your virtual expert checking up on your money while you live. Let’s look at the top 5 reasons why a financial adviser can assist you with planning for your retirement:
A financial adviser can assist you with working on a plan before you spend or invest any money. Going through your finances might seem embarrassing, but it is easier to explain it up front than to try and work your way through it later. Being safe with your money can be the one thing that helps you keep it secure.
Financial advisers are trained to work with everything to do with money. They are not just accountants or bankers. They know how to explain your portfolio and interests to you in detail. You may need them for a retirement plan, but they can help you assess your finances to save for retirement.
3. Financial Goals
You may want to take care of your children, and a financial adviser can assist you with making sure you have more money and access to funds. You could do everything from education for your children to a holiday for yourself with the right advice. Discussing any goals, you may have with your financial adviser can help you to expand them.
4. Save Time
Most people hate sitting in an office waiting for someone to advise them. Whether the direction is paid or free, it is still a hassle. Consider your financial advisor your virtual assistant, helping you sort out your wages at the click of a button. Find out if the fees they charge include all consultations or if you will have to pay for each one separately.
You would want the person managing your portfolio to give you the best advice on shares and properties for investment. Finance advisers take the extra step to ensure you know about all your options. They can help you to grow your assets on the stock market and take a considerable task out of your way.
When hiring a financial advisor, look for someone interested in your ideas for your retirement. Someone who can give you peace of mind while helping you to understand what you are investing in. you shouldn’t be afraid to talk to them about your concerns, even if the investment is minor.
At What Age Should You Start Making Superannuation Contributions?
The age you should start investing your money at would be in your 40s. If you want to be innovative and retire comfortably, investing will make sense when you start working full time. Unfortunately, many people between the ages of 20-30 have no real financial fallbacks that are reliable. Retirement isn’t seen as a necessity because it seems decades away, and that is where many make the mistake of not saving.
Retirement shouldn’t leave you feeling confused or lost. You should have a steady plan, even if the goal is only for your 40s. You want to get the goal rolling as soon as possible. With the high rates and inflating living costs, the sooner you start, the better.
Association of Superannuation Funds of Australia (ASFA) noted that the minimum cost of a comfortable retirement for singles is $45,239 annually and $63,799 annually for couples. This would include people who are homeowners and have the expenses to go along with it. A single person with no actual costs would need a lower amount.
Let’s take a look at the different ages you need to start saving at for a comfortable retirement:
You may be tempted to throw all caution to the wind, but consider as little as $500 a month in your 20s. The ideal would be to save 20% of your monthly salary, but $500 is a good start. You can work towards this goal by keeping the bonuses you get from your company. Use the time to look at a temporary residence and a low-maintenance car while starting.
Your 30s may be harder for saving because most people would get married, buy their first home and start having children. It may be even harder to do if you and your partner do not earn similar incomes. However, if it is possible for you to be cautious with your spending, then pushing the amount you save from $500-$800 can make a huge difference. The key is to remain as consistent as possible, and you will see results.
At this age, you would have had time to spend money on fun things and will be preparing to settle down. You have worked for the same place for a while and accumulated a sturdy pension plan. Now would be an excellent time to speak to a financial advisor about possible investments. Doing it in your 40s would mean lots of returns in your 60s. You should be saving $1000 every month and on your way to paying off debt like a house or car.
You would be close to your retirement, and with a 20% increase in your monthly savings, you should have managed to save $1200 a month. You should consider legacy planning and preparing your health care plans before retiring. If you have children, you may look at their education plans for universities or overseas studies. You may even want to start thinking about your grandchildren and how you can assist them through retirement.
Any money you may have invested should have earned compound interest by the time you are in your 50s. Your money should have grown considerably if you started investing in your late 30s. Money may be tight if you still pay for a bond and education while saving for retirement. To alleviate that pressure, you can calculate the compound interest you have accumulated and have monthly increments of that money paid to you.
If you do not intend to use the money you have in your retirement to pay off old debt, then start taking care of it in your 50s. Any debt that you may have had can also be paid off with your compound interest to make your super work better for you after retirement. That way, your super is entirely yours to spend on the luxuries for which you saved.
Which Assets Are Suitable Superannuation Investments?
There are many investment classes: Australian, international, property, and infrastructure. Unfortunately, most people ignore their super fund investments. Understanding your fund’s investment strategy is an excellent way to review performance and keep an eye on the assets to which you are tied. The first step you need to take is to know the difference between listed and unlisted assets.
Listed assets are listed in the market or stock exchange, where investors can easily buy shares. The markets vary in size with small companies or large corporations that have gone public. This is also where they can sell those shares for a profit in the relevant markets. Here are a few of the listed assets:
Unlisted assets are not listed on the stock exchange. They are essential to most investments because they provide diversification, stable returns, and a long-term investment focus. Here are a few examples of unlisted investments:
Even though unlisted assets are often put in the same classes, they differ significantly. The categories are in-depth, making the investments easier to focus on individually.
Property investments involve directly acquiring property by an individual investor or a group of investors. The returns are collected through the increase in the value of the property or through rental incomes. Management would need to help the owner to maintain the properties if they want to keep their investment steady. Some of the types of properties include:
Infrastructure investments are service-based assets. Infrastructure projects rely on upfront investments in large quantities to help maintain them. These investments improve the quality of living standards as well as the economic development of the country. The money that they generate is used to develop or maintain assets such as:
There are three main types of private equity investments. These investments provide money that assists with the running of private companies. Most of these companies are not listed on the stock exchange or the markets and are not traded publicly. Private equity investments require specialist fund managers to bring value to companies’ portfolios. They include:
Private credit describes non-investment grade debt. This line of credit is usually extended to large corporations looking to expand their portfolios. They require the assistance of a portfolio manager to help maintain the credit and to ensure that investors do not overextend and create bad credit lines. They consist of:
If the investment classes are similar, companies will group them. Unlisted assets carry the same characteristics but play vastly different roles, unlike listed assets.
A super fund or superannuation fund helps you to save money for retirement in the long term. Because it is a long-term investment, your money grows over the years. When you work, your employer makes contributions towards your super fund account for you. The employer also makes deductions from your income until you are at retirement age. Your super fund invests and manages this money for you until you retire.
Always speak with your accountant in relation to tax matters. Generally speaking, life insurance within super can be tax-deductible. The rate is 15%.
Yes, you can pay for your life insurance premiums using your SMSF balance. In fact, you can generally use any super fund in Australia.
Your retirement should consist of a range of investment opportunities you can lean on when you are no longer receiving an income. Whether using your super as an income stream or investing your money, it is wise to know what you are in for.
Start your journey with a financial adviser who can help you to plan the kind of retirement you want. Whether you plan to invest in property overseas or you want to retire quietly in your home, you need to have a goal. Find someone who supports that goal and helps you map out a plan to reach it.
If you haven’t been saving any money and find yourself in your later years without a pension, then speak to your employer about how you can cut costs with your tax or extend your employment past 65 years. Many employers allow employees to stay on for an extra few years. This offer could be the second chance you get to start saving money that can draw interest.
If you have not selected an investment group to invest your money in, you need to discuss your options with your super fund manager. They could have made a choice they thought was suitable, which benefits the idea of retirement, and you may have time to change over. Then, fine-tune the result of what you will be left with while you still can.
Superannuation is there to assist you in making the most of your savings. It boosts the regular retirement income to an entire investment portfolio that anyone can access after 60. Great protection plans cover you when you move from job to job. You will never have to worry that your funds will simply get lost as you move ahead and live your life.
You can avoid being a part of the statistics of older adults who cannot see their families or care for themselves when they retire. Tax-free payouts mean you save money, and you can use them towards your dream retirement. There will be no need to rely on government handouts if you invest wisely and talk to an adviser about your future.