Defined by the ATO: Superannuation, or ‘super’, is money put aside by your employer over your working life for you to live on when you retire from work.
Superannuation is a tax-effective way to save for retirement. It’s made up of compulsory employer contributions, your own personal contributions and at times, additional Government contributions. It was introduced because, in general, people are pretty average at exercising restraint – we see it, we want it, we buy it – even if we can’t afford it (Hello, buy-high! And ah, hello debt).
In the finance world, superannuation is generally explained like this:
The money deposited into your super fund is invested on your behalf into different assets like shares, government bonds, infrastructure, term deposits, and property, as a way to grow your account balance while you’re still working. When you reach retirement age and stop working, or you’ve satisfied some other criteria, you can access your super (which has hopefully grown substantially through investment earnings!) to give you money to live on.
In the real world, superannuation is explained like this:
As we mentioned, the government worked out that some of us aren’t that great at saving. Especially when it’s for something (retirement) that seems so far away. So, they set up a system where our employers help us to save by automatically directing a set percentage (currently 10.5%, set to increase to 12% by 2025) of our pay into a tax-effective retirement savings account we can’t touch until the legal retirement age.
Pretty nice of them! But even though the intentions are noble, there are a few problems that crop up.
Firstly, because we don’t see our money disappearing out of our pay packet, and we often don’t decide what happens to that money (even though we should), we don’t think about it much. Some people don’t even understand that it’s actually their money! Now, the problem with that is that we don’t pay enough attention to what’s happening to it. And ignoring that can be very costly indeed.
Secondly, too many Aussies have multiple super accounts, which means they’re paying unnecessary fees on those accounts. It’s like having one phone but taking out a plan with Optus, Telstra, and Vodafone. It adds up to a whole lot more cost, but zero additional benefit! Crazy, huh? It’s the same thing with super, except it’s worse because the costs are higher, super accounts sit ignored for years or even decades, and the impact of compounding over time applies to those unnecessary fees too, eating away at the benefit of your savings.
The benefit of our compulsory super system is that anyone with money in super already has an investment portfolio! A lot of people don’t understand that.
Your super fund’s job is to manage and grow your money over time. They do this by investing in different assets, which means that you already own a range of different investments (which is kinda cool), but they are held on your behalf by that fund.
Think of your super provider as a supermarket trolley. Your money (super contributions) will be used to fill the trolley with groceries (investments).
In a nutshell, you need money to live comfortably when you retire.
The easiest way to make sure you retire with more super
When it comes to super we tend to just let our employer keep filling up our trolley without giving any thought to whether the wobbly wheel is making our groceries (money) topple out – that’s the fees you’re paying your super fund. Some trolleys have minimal wobble (low fees) compared to others. We’re distracted by juggling our shopping bags and our whinging kids as we try to find our car keys and – more often than we’d like to admit – where we actually parked our car. We get it. Most of us feel like we don’t have the time or energy to swap trolleys or even pay any attention to that wobbly wheel.
That’s where we come in. At Super Fierce, it’s our mission is to make sure your money isn’t being chewed up on unnecessary super fees. That’s the easiest way to retire with more. We want you to enjoy getaways with friends and loved ones, cocktails by the beach, that Harley and a leather jacket … whatever it is that you want to be doing in your retirement.
Now, imagine yourself rocking your senior years. Got the picture in mind? Great! Now, let’s make sure you’re on track to do that.
We’ll help you create your Free Retirement Plan so you can see how you’re tracking and work out if there are ways you can save even more. There’s no catch – we genuinely just want to help other humans enjoy their life … their whole life!