Early bird gets the worm? It applies to setting up your Superannuation Fund too!
The earlier you start your superannuation fund, the better when it comes to accumulating enough wealth to fund your retirement.
Having an early start to setting up your super can offer many benefits relating to financial accumulation, investment opportunities, tax obligations, and your future pension. By starting your super earlier on in your working life, you’ll have time to make the most of all your fund has to offer.
Whether you’re setting up a self-managed super fund, joining a retail or even an industry super fund, here’s why you should consider setting up your superannuation fund as early as you can.
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Build Your Balance Takes Time
Accumulating wealth takes time, and building your superannuation is no exception. The earlier you start saving, the more time you’ll have to build your super balance and make the most out of the financial opportunities that may come your way.
Australia’s superannuation system is structured to support people to spend their working lives adding on to their super wealth, little by little, so that they have a healthy pension income when they reach the retirement age.
By contributing to your superannuation throughout your working years, it’s possible to successfully build a large sum of wealth. Your super is inaccessible until you reach preservation age and meet the eligibility criteria to withdraw it; thus removing the temptation to spend your savings and allowing for a long-term financial accumulation.
With sufficient time to grow, your super balance has the best chance of reaching its potential and then being able to provide more money for a longer duration once you’re eligible to start withdrawing funds.
Benefitting from Tax Incentives
As a means of encouraging Australians to start saving super earlieer on in life, the Australian Government offers great tax incentives to members of super funds, regardless of whether those funds are self-managed super funds (SMSF), retail funds, industry funds, public sector funds, or corporate funds.
With an Australian super fund, you’ll be eligible for significant tax concessions on superannuation earnings and investments. In most cases, employer contributions and investment earnings on your super balance are capped at a maximum tax rate of 15%.
Concessions can go a long way towards reducing your bill at tax time, making maintaining a superannuation fund well worth your while at the end of the financial year.
Making the Most Out of Investment and Contribution Opportunities
The longer your superannuation fund is in the accumulation phase, the longer you can focus on making investments work for you, building your wealth before you need to use it. From 1 July 2022, if you are under 75 years old, you can make personal super contributions and salary sacrifice contributions (within the member existing contributions cap limits) without meeting the work test. You can also use the bring forward rule
Many superannuation fund types allow for investment opportunities, though some offer a wider range of opportunities than others. For instance, self-managed superannuation funds, or SMSFs, are among the most flexible when it comes to investment pathways.
By starting your super early and exploring plenty of investment strategies and options, you can spend years benefitting from investment revenue, scaling your super to offer a high pension income when you’re ready to retire.
Preparing to Retire
The purpose of your superannuation fund is to provide a regular income for you once you’ve reached retirement and are no longer a participating member of the workforce.
Once you retire, you’ll begin to withdraw from your super fund at least at the minimum rate stipulated by the Australian Government and Australian Taxation Office, with this percentage-based rate depending on your age and circumstances.
In the pension phase, your super fund may have more difficulty growing, and your investment strategy may change, as your fund will need to provide regular money to support your needs and lifestyle. But with a strong balance behind you, accumulated as part of a long-term super plan, this doesn’t have to be your downfall.
If you’ve spent plenty of time adding to your super throughout your working life, you’ll be in a much better position to sustainably fund a long retirement without having to rely on the age pension, which is often insufficient to fulfill financial obligations and lifestyle factors.
As with anything, putting a long-term plan in place early for your superannuation can save you a lot of trouble later on. With a super fund that’s had time to grow, invest, and succeed, you can approach retirement with confidence and plenty of cash.
Contact Us
If you have any questions or would like to learn more about setting up a superannuation fund early, we are here to help. Our team at Mint Super Audit is dedicated to providing you with the information and support you need to make informed decisions about your financial future. Whether you’re a young professional just starting your career or someone looking to optimize their retirement savings, we’re ready to assist you every step of the way.
