The return and growth of your superannuation balance will depend on if you invest it right. For couples looking to live a comfortable retirement, it has been found that you will need around $62,000 per annum to live on. Below we take a look at the pros and cons of using your superannuation as an investment strategy.
Pro’s:
Tax effective - Superannuation investment earnings are taxed at a maximum of 15% while in Accumulation phase. Also, concessional contributions are contributions that are made into your superannuation fund after tax. These contributions reduce the individual’s taxable income as they can be claimed as a tax deduction in an individual’s personal tax return for the relevant year and also taxed at a rate of 15% by the super fund. Superannuation investment earnings while in a retirement income-stream phase are also not generally taxed for those with balances below $1.7 million. Pension payments and withdrawals after the age of 60 are generally tax-free.
Provides insurance benefits - There is generally a default amount of life and disability insurance provided by most superannuation funds to protect you and your loved ones in the event of death or disability. Premiums are funded from your superannuation rather than being paid from personal cashflow.
Money for your retirement - It is compulsory for your employer to contribute to superannuation. At the very least it represents a regular saving which has the ability and choice to be invested into quality long-term assets, such as shares, property, fixed interest.
Protection against bankruptcy - did you know that your superannuation balance is protected from creditors in the event of bankruptcy.
Flexible Estate planning arrangements - You can choose certainty by making a binding nomination upon death to either an individual or the estate. Your beneficiary may have the option of accessing your superannuation as a lump-sum or a tax-effective pension. Alternatively, you can choose to nominate the estate where monies can form part of your will.
Con’s:
Monies are preserved and cannot be accessed until you meet a condition of release. This is commonly met by reaching preservation age and retiring or reaching the age of 65, whichever is the earliest. Otherwise access can be obtained via unfortunate circumstances such as Death or disability.
Complexity - It’s often perceived that super is complex and many Australians have difficulty understanding This is where good advice counts.
Fees - The range for professional management fees differ greatly. Some professional managers can charge lower fees whilst some charge higher fees, mostly depending on the type of investment management chosen.
Suitable for:
Everyone.
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