The balance in your superannuation account generally rises over time as you accumulate contributions from your employer. However, super fees and changing investment performance can lead to dips in your super balance.
Super funds
Investment safeguards – super is highly protected in Australia and cannot be accessed until a condition of release is met. Professionally managed funds – Student Super members are invested in Macquarie and BlackRock funds or Westpac cash management accounts, depending on their balance.
Superannuation is generally protected upon bankruptcy from creditors as it is considered exempt divisible property. This protection also extends to lump sums paid to a bankrupt from their superannuation fund on or after the bankruptcy date.
Withdrawing some of your super early is a big financial decision that you shouldn't make lightly. It could leave you with less money for your retirement and impact your insurance within super. So before applying, stop and think about the potential consequences of accessing your superannuation early.
The negative superannuation returns most funds experienced in FY 2021/22 were largely caused by drops in the values of Australian and international shares. These sharemarket falls in turn were caused by factors including rising inflation, interest rate hikes and international events like the war in Ukraine.
Savings in super can do more
When you save money in a regular bank account, you're earning interest at a fixed rate. In super, you have access to lots of ways to invest your savings, giving you more options that could earn a better return and see your savings grow faster.
If you withdraw your super and deposit it into a savings account, it may see little to no growth over your retirement years. This will depend on your account type and balance of course.
A lump sum withdrawal is a cash payment from your super to your bank account. You can request to withdraw a lump sum if you've met certain conditions set by the Government. Follow these steps to make a full or partial withdrawal.
Hostplus had the best performance with 8.9 per cent, followed by AustralianSuper (8.9 per cent), ART and UniSuper (both 8.4 per cent), and Cbus (8.3 per cent).
YOU CAN MINIMIZE TAXES AND EXPENSES
Managing your own super can be more affordable than other superannuation funds, particularly as your funds grow, thanks to tax and expense benefits. For one, in an industry or public super fund, resources are pooled and every member is treated the same.
Con: The Risk of Personal Debt and Bankruptcy
Tapping into these accounts early means business owners may have to pay a penalty fee, as well as taxes on the amount withdrawn. And using these funds may mean not being able to retire when initially planned.
To help protect your retirement savings in a falling market, one important thing you can do is to minimise any withdrawals from your super or retirement income account. This means you can reduce the need to sell your investment assets and keep more of your money invested, giving the market time to recover.
Super fund performance: Financial years (1992–93 to 2022-23)
In the year to June 2023, the median Growth returned 9.2%, the 12th positive return in 14 years and well ahead of the typical long-term objective of around 6% per year.
The ASFA Retirement Standard Explainer says a comfortable retirement lifestyle would need $640,000 in super for a couple, or $545,000 for a single person.
Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.
If you're aged 60 or over and withdraw a lump sum: You don't pay any tax when you withdraw from a taxed super fund. You may pay tax if you withdraw from an untaxed super fund, such as a public sector fund.
If you are under age 75, you can make voluntary personal contributions regardless of your employment status. Are there limits on how much I can contribute into my super? The general concessional contributions cap is $27,500 per financial year for the 2021/22 and 2022/23 financial years.
If the employee is under 18 years of age, and they do not work more than 30 hours in a week you are not compelled to pay super contributions, however you can pay super to these employees if you wish to, or if payment is required under the terms of a workplace agreement.
When you retire you could withdraw your super as a cash payment from your super account. You can open an account-based pension and set-up regular income payments. You can also withdraw smaller cash payments from your super account or account-based pension. The choice is yours.
You can make an after-tax contribution to your super from your take home pay. These are called non-concessional contributions. You can contribute up to $110,000 each year in non-concessional contributions.
An ANZ OneAnswer Personal Super fund option, which is managed by OnePath Custodians and invests in diversified fixed income products, was the worst performing of any over the eight years to June 30, 2022, with returns of -0.003 per cent.
Remember, even if you're young you may need death cover so your family has enough money to pay your outstanding debts (such as home mortgage or business debts) if you die. Opting out of your fund's default cover may save money now but could be a false economy if you have a partner or work in a high risk occupation.