Regardless of how hard you work throughout your life, if you do not put money away for retirement, you could face a low-income stream in your golden years. Many people want to live out their goals after retirement, and those often include travel and enjoying the freedom of not being tied down to a job. In order to realize your post-retirement goals, it’s a good idea to start planning for your retirement in your younger years. Super annuation is a government program that encourages people to save for retirement and obligates employers to help their employees contribute.
What is Super Annuation?
The idea behind super annuation is that once people retire, they have an additional supplementary income stream in place to make up for no longer working. In order for the management and accumulation of super annuation funds, governments set up minimum contribution amounts for individuals and their employers. Contributing to a Super is further encouraged by the tax breaks it provides at tax time.
When an employer is obligated to contribute to their employee’s Supers, they have to make those contributions on top of their regular salaries. Mandatory employer contributory rates range from 9.5 percent to 12 percent.
People are further encouraged to and given the option of making additional contributions to their Supers by diverting more of their income on a regular basis, and this is often referred to as ‘salary sacrifice’.
Accessing Super Early
One of the main issues concerning accessing super early is when people have multiple Super funds and have to pay the relevant account fees. Rather than consolidating these funds into one account, when people fail to do so, it can cost them in additional account management fees.
When it comes to accessing Super early, there are ways to apply for a ‘release’ of Super, but in order for that to be permitted without a big tax penalty, certain stipulations have to be met. Circumstances in which Supers are permitted to be released early include when someone is facing a terminal illness, have reached retirement, or when someone is facing an incapacity and cannot maintain gainful employment as a result.
Cashing in any retirement fund prior to its maturity or when conditions of its release are met can mean taking a hit in terms of taxable income, or being denied access to it prior to retirement age. Governments do, however, make allowances for extreme situations in which people are desperate for their funds and are facing challenges that through no fault of their own have prevented them from being able to work or reach their full retirement age.
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