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 retirement1. The current age pension rate for a single person is only $23,600 per year2. 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 you’re not paying extra fees.
If you’re not sure which fund is right for you, seek advice from a financial adviser. They can also advise you in relation to any insurance cover you hold in the super fund you are rolling out of. You don’t want to discover you have lost your insurance and cannot get the level of insurance you require in your new fund.
Myth 3: It’s hard to consolidate super
Times have changed and you can easily consolidate your super online. You may even discover that you have some ‘lost’ super that you didn’t know you had.
You can also transfer any existing insurance into your current super account, but this must be done prior to consolidating otherwise you will lose your cover. To search for your super and consolidate simply log into your account.
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 adjust your insurance at any time. Simply log into your account to check the type of cover, sum insured and premium amounts. You can then 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, seek advice from a financial adviser. They can help you navigate the complex world of insurance and help you understand the type and level of cover you need. If you don’t have an adviser we can put you in touch with one. You can either receive advice purely on your super or on your broader financial situation.