Superannuation is the financial backbone of retirement for Australians, yet many lack a clear understanding of their superannuation status.
This guide will systematically walk you through five key aspects of superannuation: investment portfolio, fee structure, insurance and beneficiary planning, tax optimization, and contribution oversight.
I. Investment Portfolio Management
Balance Risk and Return
•Clearly define personal retirement income goals (e.g., AUD 60,000 per year)
•Determine your risk tolerance level
•Calculate whether the expected return rate of your current investment portfolio meets your goals.
Investment Strategy Adjustment
If returns are insufficient, consider:
•Extending working years
•Choosing other investment options
•Adjusting retirement income expectations
•Regularly (at least once a year) review investment allocation
II. Fee Structure Analysis
Fee Composition
Superannuation annual fees typically range from 0.5% to 3% of the account balance.
Fee Verification Steps
•Download the latest Product Disclosure Statement (PDS)
•Focus on the “Fees” section
•Use comparison tools to assess reasonableness: https://www.ato.gov.au/single-page-applications/yoursuper-comparison-tool
•Check actual deductions in account transaction records
Special Considerations
•Beware of hidden additional financial advisor fees.
III. Insurance Coverage and Estate Planning
Comprehensive Protection Plan
Thoroughly review three types of default insurance:
•Life/Terminal Illness Insurance: Ensure coverage is sufficient to clear debts + cover 5 years of household expenses + children’s education funds.
•Total and Permanent Disability (TPD) Insurance: Needs to cover home modifications + lifelong care + rehabilitation costs.
•Income Protection: Should reach 70% of normal income and cover at least a 2-year benefit period.
Premium Management
•Check bills to confirm current premium expenditure.
•Adjust coverage levels according to actual needs (e.g., reduce coverage after children become adults).
•Default insurance within superannuation is generally more expensive than retail insurance, and carries risks such as potential inadequate coverage, difficulty in claiming, delayed claims, or even denied claims. It is recommended to contact a professional to compare policies for free and adjust your insurance coverage to match your needs.
Designating Beneficiaries
•Must be handled separately (a will does not determine who your superannuation should be paid to after your death).
Three Ways to Nominate:
•Non-binding nomination (suggested nomination)
•Binding nomination (valid for 3 years)
•Non-lapsing binding nomination (permanent binding nomination)
How to Designate:
•Request a form from your superannuation company.
•Fill in beneficiary information.
•Update regularly (especially with changes in family structure, e.g., divorce, new marriage).
IV. Tax Optimization Strategies
Tax Differences by Account Type
•Accumulation Account: Investment earnings tax is 15%. If held for more than 12 months, Capital Gains Tax (CGT) rate effectively reduces to 10%.
•Transition to Retirement Account: Tax structure is the same as an Accumulation Account.
•Pension Account: All income (including realized capital gains) is tax-exempt, regardless of age.
Important Notes
•Tax-free component: Can be withdrawn at any time tax-free.
•Taxable (taxed) component: May incur tax upon withdrawal if you are under 60 or if paid to a non-tax dependent upon your death.
•Taxable (untaxed) component: May incur tax upon withdrawal or upon your death.
•All superannuation withdrawals must be deducted proportionally from each tax component.
Withdrawal Strategy
•All withdrawals are proportional to tax components.
•Withdrawals after age 60 enjoy more tax-free benefits.
V. Comprehensive Review of Superannuation Contributions
Contribution Types
•Employer Mandatory Contributions: 12% of salary, paid at least quarterly.
•Voluntary Contributions:
•Pre-tax contributions (salary sacrifice)
•After-tax personal contributions
Verification Steps
•Check your superannuation statement or online account.
•Verify if the actual amount received equals 12% of your salary.
•Confirm if contributions are received quarterly.
Consider whether additional contributions are needed to:
•Increase your superannuation balance.
•Pay insurance premiums.
•Reduce personal income tax.
Important Reminder
•Money contributed generally cannot be withdrawn until retirement age.
Execution Recommendations:
•Establish an annual review system.
•Keep all relevant documents.
•Review promptly after major life events.
•Consult a professional financial advisor when necessary.
By systematically performing these five checks, you can comprehensively understand your superannuation status, ensure optimal growth of your retirement funds, and provide a solid guarantee for a comfortable retirement.
Want to know more?
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Author Profile: Jeffrey Liu, JP, is the founder and principal adviser of Hippo Insurance (aka: Hippo Wealth), with a deep expertise in wealth protection. His extensive experience includes roles in the wealth management divisions of Westpac, ANZ, and a local multi-family office. As the host of “Riches Talk,” a podcast dedicated to cultivating personal and business growth, Jeffrey has established himself as a thought leader in developing life riches. His insights have been featured on SBS, The Australian, and Channel 7. Notably, he was a semi-finalist on Australia’s Got Talent in 2010. Learn more at http://www.hippoinsurance.com.au
