Although most of us have money in super, there are still some myths and misconceptions surrounding it. We explain five of them.
Myth 1: Super is a form of tax
It’s understandable that some people think super is a form of tax. After all, you’re likely to see super payments on your payslip near the amount deducted for tax – but super is not a tax.
It’s true that you can’t access it until you retire but it’s your money and it makes sense to keep track of it, look after it and top it up. If you don’t, you’ll have to rely more heavily on the Age Pension to support you when you retire and the Age Pension is unlikely to be enough to live a comfortable retirement.
The ASFA Retirement Standard estimates that if you’re a single person you need about $42,700 per year to live a comfortable retirement. The current age pension rate for a single person is only $23,600 per year. There’s a clear gap and super can bridge that gap. And, as the cost of living increases, depending on when you retire, you are likely to need even more than $42,700 each year to live a comfortable retirement.
Myth 2: You have to use your employer’s super fund
Most people don’t have to use their employer’s super fund if they have an alternative fund. Your employer will offer you the option of joining their fund but, as long as you’re eligible, you don’t have to take it.
You simply need to fill in a ‘Choice of fund’ form and give it to your payroll department. They will do the rest.
Whatever fund you choose, consider consolidating any other super account balances into your chosen account so it’s easier to manage.
If you’re not sure which fund is right for you, contact us.
Myth 3: It’s hard to consolidate super
Times have changed and you can easily consolidate your super online via an existing super account or through your Centrelink myGov account. You may even discover that you have some ‘lost’ super that you didn’t know you had.
Myth 4: If you want to contribute more to super you need to contribute a large amount
It’s a common myth that super funds only accept large contributions into super. This is simply not true. You can put any amount, even $5, into your super. You can also claim a tax deduction in your next tax return.
Myth 5: Insurance eats away at super
Your super fund provides you with insurance so that you and your family are protected in case something happens to you and you die or can no longer work.
You can choose to reduce, increase or cancel your cover. However, keep in mind that most people are underinsured. If you have children, a home loan or other debts you need to consider how you, and/or your family, would survive if you couldn’t work or died.
If you’re worried about protecting your family, please contact us. We’re here to help.