Superannuation is a tax-effective means of saving for retirement by investing money during your working life.

Contributions to your super are made regularly by your employer and topped-up where possible with voluntary personal contributions.

The contributions received by your super fund are then pooled with the contributions of all the other members of the fund and invested in a variety of different sectors such as property, cash, fixed interest, Australian equities, international equities and so on, depending on your choice.

Super can:

• assist you with long term savings
• help provide you with a financially comfortable and secure retirement
• give you access to favourable tax treatment of super contributions and benefits, and
• give you access to insurance offered by your super provider and the associated tax savings and benefits.

Super is about helping you achieve the type of lifestyle you want in retirement.

Superannuation is one of the simplest and most tax-effective ways of saving for your retirement. And saving for retirement is now more important than ever because:

• we’re living longer

• we’re an aging population, and
• many retirees do not have adequate savings to help fund their retirement.

The combination of these factors puts pressure on Government funding in two important areas: healthcare, and the age pension.

With fewer people working and paying taxes to support these schemes, there is less public money to support more people.

As a consequence, the government provides significant tax incentives to encourage workers to use superannuation to save for retirement.

Ensuring you have adequate superannuation may be the difference between a comfortable retirement and one fraught with financial concerns.

• You are likely to be in retirement for longer than any generation
  A 55-year old woman’s life expectancy is now 85.5.(1) With an average retirement age of 60(2), that’s over 25 years spent in retirement. How you thought about how much money you might need in your retirement?

• You might need more money than you think
  The Westpac – ASFA Retirement Standard figures for the December 2009 quarter show that for a comfortable lifestyle in retirement, a single person requires $38,611 a year and a couple, $51,727. The means-tested government pension falls far short of this benchmark and is unlikely to provide you with enough funds to enjoy the lifestyle you desire in retirement.
• Your employer super payments may not be enough to meet your retirement goals
  The current nine per cent super guarantee paid by employers is insufficient to fund a comfortable retirement, according to research commissioned by the Investment and Financial Services Association (IFSA).(3)

While IFSA recommends lifting the minimum contribution to 12 per cent of salary, the general sentiment is that the Government is unlikely to mandate any increase in the near future. The onus is therefore firmly on individual investors to make up the shortfall with additional contributions.

There are several options available to you once you are eligible to receive your superannuation benefit. While it’s one thing to have a lump sum of money saved for your retirement, it’s another to have a regular cash flow to meet ongoing expenses throughout your retirement years.

Some ways you can achieve an income stream are:

• By withdrawing your super as a lump sum and investing those funds in income-bearing investments.

• Keeping your super benefit within the superannuation system and drawing a regular income from those savings (ie a pension or annuity).
• Keeping your super benefit within the superannuation system and drawing ad hoc lump sums when required.
• Qualifying for social security, age pensions, service pensions or other benefits.
• A combination of the above.