The S Word
Some of us instantly switch off as soon as Super is mentioned. In fact, you are doing pretty well by clicking onto this page.
A common sentiment we come across is that "I will worry about Super later on. I'm not retiring for at least another 20 years." Sound familiar?
We believe that it's more exciting to think of Superannuation NOW and think of it as your account for building long term wealth.
Investors should focus on the one simple fact that Superannuation is a tax-sheltered vehicle for retirement. That is, it helps you make money.
Speaking generally, superannuation earnings are taxed at 15% and non-super earnings are taxed at your marginal rate. Presuming the highest marginal rate of 46.5%, look at this simple example which shows what the different tax rates can mean over the long term:
- Investment: $100,000
- Investment Term: 20 years
- Annual return: 8%
- Final sum if held outside of Super: $231,217
- Final sum if held within Super: $372,756
- Difference: $141,541 means you are 61.2% better off in Super.*
A key part of Investing for Wealth is making the most of Super by putting whatever you can into that "environment". If you can afford to do without some of your funds until retirement, Super is invariably the best place to park them.
The recent changes enacted by the Government have opened up a raft of new potential strategies for people of all ages to use Super for wealth creation.
Who knows? Talking to us about Super might be interesting.
* Note that this example is merely a general illustration of the long term effects of varying tax rates on notional investment returns. It is not to be taken as financial advice as we have not taken your individual situation into account.