As the Government tinkers around the edges of superannuation legislation it is common to hear misconceptions discussed, not only around the barbecue but also in the media. We attempt to debunk the following myths:
- The Government wants me to work longer and doesn’t want me to retire until 67
Untrue, you can retire at any age you like. If you want to access the Age Pension then you will need to wait until age 67 and if you want to access your superannuation you need to wait until age 60 but you can have many sources of income that can support you to retire at any age. Take the time early on to plan when you would like to retire and then structure your savings portfolio around these goals.
- Investment returns are so poor in superannuation
Superannuation is not an investment. Superannuation is a tax vehicle to encourage people to save for retirement. Within the superannuation environment there are investments which perform in exactly the same way as if you had invested in these same investments outside of superannuation. Take the time to review and understand the investment options you have within superannuation and make decisions to invest your savings in a way that makes you comfortable.
- The Government wants to get rid of the Age Pension
With our regime of social security it is likely that we will always have an Age Pension, however the access to this system will reduce over time. The Age Pension should be considered a safety net for those unable to save over their lifetimes or be able to work to enable this savings. In the future those of us retiring from the workforce have had compulsory superannuation contributions for our entire working lives and therefore should have healthy nest eggs to reduce our reliance on the Age Pension. Even with the recent reforms, Australian still ranks highly in the world in relation to our effectiveness and sustainability of our three pillar retirement system.
- My compulsory superannuation contributions will be enough to retire on
Unfortunately, even as the compulsory super contribution rates increase, it is unlikely that your level of superannuation savings over your working life will be sufficient to provide you with an income stream comparable to your working income. It is important to make additional contributions to ensure a level of savings for a comfortable and enjoyable retirement and with the restrictions in how much you can contribute each year, it is important to start this savings earlier than later.
The retirees of the future are living longer, healthier and more productive lives after their retirement and higher savings balances will be crucial to ensuring that they can continue this lifestyle. Effective and adequate planning earlier on can ensure that you are set up for a comfortable retirement.
If you need assistance with determining what’s best for your financial situation send me an email at cassandra.macolino@williambuck.com or call 08 8409 4333.
