NOTE: we do our best to share general resources so you can do your own research but keep in mind this information doesn’t consider your personal circumstances, objectives or needs. When it comes to investing in your super, you should consider if it’s appropriate, read PDS and TMDs and reach out to a financial advisor and tax accountant. When investing, there may be tax implications and you should get advice from a licensed tax adviser and financial advisor.

Your superannuation (or super) can be the unsung hero of your financial portfolio. It’s working diligently behind the scenes, quietly gathering momentum and securing your future.

The truth is, your super isn't a dull mandatory savings plan. In fact, it has hidden perks that can speed up your march towards early retirement or financial independence . After all, we wouldn’t call it “super” for nothing.

In this episode, we're peeling back the boring jargon of superannuation. We reveal what makes super, super: among other things, insurance coverage and several tax benefits if you qualify.

During our conversation, we provide a basic checklist for choosing a super fund, including fees and investment returns. Then, we shed light on different types of super contributions, other ways money goes to your super, and when you can access your super.

Factors to consider in choosing a super fund

When you're sifting through super funds, there are several factors you need to consider:

• Fees
• Risk and investment options
• Investment returns
• Insurance

Let’s break down the most important things you need to know about each factor.

The real deal about super fees

When it comes to super, every little bit counts.

Every super fund charges fees, usually in dollar amount, a percentage, or sometimes both. In the world of super, the general rule of thumb is: the lower the fees, the better. Ideally, you'll want to aim for a super fund that charges less than 1% in fees per year.

You might think: "what harm can these small fees do?". But let's not jump to conclusions just yet.

Imagine you're 30, earning $70,000 a year, and you've managed to amass a cool $50,000 in your super fund. You're living the dream, aiming for a comfortable retirement in your sixties.

Now, let's throw in a curveball. Have you thought about the impact of your super fund's fees on your retirement savings?

Consider two identical super funds, both doing admirably well with an annual return of 8%. One of these charges a fee of 2%, while the other keeps things low at 1%. Doesn't seem like a big difference, right? But over time, this 'insignificant' percentage can drastically alter your financial future.

That seemingly insignificant 1% could make you $76,000 poorer at retirement if you stick with the fund charging 2% instead of 1%. Yes, you heard it right – a staggering $76,000 gone, just because of a 1% difference in fees. That's enough to make anyone sit up and pay attention.

To put it in more concrete terms, the difference between these two super funds is not just a few dollars. It could mean a new car, a long-awaited dream holiday, or a year's worth of gourmet coffee every morning in retirement.

Think it's too dramatic? We highly recommend running different scenarios on the Money Smart website . They've got an array of calculators that can help you visualise how fees impact your retirement savings.

Knowing your super investment options and risks

Think about your super fund like a giant buffet at your favourite restaurant. If you're the kind of person who likes to let the cooks fill your plate for you, then you've got the 'MySuper' option. This is the usual choice where about 70-80% of your money goes to things that grow over time, like shares and property. The rest goes to safer things, like bonds and cash.

But what if you like to choose for yourself? Well, there's High Growth, Balanced, Conservative, Cash, and even Ethical. Each of these options fits different people. Some are more risky, some are safer. Some are good if you've got a long time until you retire, and others are better if you're closer to retiring.

But if you like to choose your own adventure, your super fund has lots of different options for you. High Growth, Balanced, Conservative, Cash, and Ethical - all these are on the buffet. You can pick what you like best, depending on how much risk you want to take and how long you want to invest for.

Not sure what to pick? Most super funds can give you free advice to help you make the best decision.

Compare super returns performance

It's Melbourne Cup Day, but instead of horses, it's super funds racing down the track. Would you bet on a horse without knowing its past performances? The same logic applies to your super.

A good starting point is to look back over a five-year period. Now, you might ask: why five years? Why not two or ten? Well, the folks over at Money Smart recommend it as an ideal period to assess your super's performance. It's a long enough period to factor in sharemarket trends, yet short enough to be relevant.

Another tool called MySuper Heatmap can help you make sense of your super's performance. It's like your runner scanner, comparing the strengths and weaknesses of different supers.

However, comparison only works if you're comparing apple to apple. Think 'balanced option' to 'balanced option', using the same period for a fair comparison.

Yet balanced funds, despite their name, are not all balanced the same way. Some might have a 50/50 split, while others might be 75/25 between growth and defensive assets. The important thing is to understand these variations and adjust your expectations accordingly.

And remember, just because a horse won the race last year, doesn't mean it will win this year. It’s the same with super funds; past performance isn't a crystal ball for future returns.

Now, where can you make tailored comparisons to your circumstances? Industry Super Australia's website has a tool powered by SuperRatings . The tool not only compares major funds but can also advise you on fees, returns, insurance, and more.

Insurance inside your super

When we talk about insurance within a super, it typically boils down to three types. These are: life insurance, total and permanent disability (TPD), and income protection.

Now, if you’re considering switching your super fund, you should weigh the default insurance offered. Think of it as sizing up the competition. Focus on the premium rates, the extent of the cover, and any exclusions or definitions that could impact you. And don't forget to read the PDS and TMDs to consider if it's right for you.

We understand that insurances can be as complex as the plot twists in a Christopher Nolan movie. That’s why we'll by diving deeper into this subject in a future episode.

A quick tip: seeing a financial advisor to sort your insurances could be a great move. You may even want to look into additional coverage, such as trauma insurance, which isn't usually offered through super funds. More often than not, advisors' services come at no upfront cost to you. After all, they may receive commission from the insurance providers.

However, if you're someone who prefers paying upfront, chat with your advisor about it. Your advisor could turn off the commission, which could potentially lower your insurance cost. It's a win-win!

Understanding contributions and withdrawals from your super

You've waded through the four essentials of selecting a super fund. Now comes the more exciting part: how to actually keep the fund growing to give you a wealthy and happy retirement.

There are two ways to plant the seeds of that dream. And guess what—they could even possibly help you shave off your tax bill. Once those seeds have matured into a mighty financial tree, when can you pick the fruits? And what if you need to get your super earlier than planned? All these questions, we answer below.

Concessional vs. non-concessional contributions

In the superannuation world, there exist two kinds of contributions. For simplicity, think of them like two piggy banks. Both are holding your contributions for the same goal of a comfortable retirement. Yet, they don't get the same tax treatment.

The first piggy bank, the "concessional" one, holds your pre-tax money. This includes the coin your parents are required to add to it (like your employer’s super guarantee). It also holds any additional coins you toss in voluntarily that you then claim a tax deduction on.

Now, over to the second piggy bank, the "non-concessional" one. It holds your after-tax money. The dollars you drop into this piggy bank are contributions you make from your leftover, already taxed pocket money. You've already given a share to the tax office, hence the name non-concessional.

You're probably wondering: "Why would I want to add more to my super?".

Topping up your own super can significantly fatten up your retirement nest egg. Sacrificing just $5 a day (the price of a cappuccino) could mean an extra $77,000 to enjoy in your retirement. Now, doesn't that sound super?

Still, there are rules and limits in the world of superannuation. These come in the form of caps and limits that apply when you're making super contributions. The plot thickens depending on factors like the type of contribution, your age, and your super balance. We’ll talk more about it later.

How super is taxed

Why would you want to put money into your superannuation? Well, when it comes to tax, your super has a bit of an unexpected superhero cape.

When your employer puts money into your super or you choose to give up some of your salary for it (concessional contributions), 15% of it is paid as tax . But this is much smaller than the amount you usually have to give to the government from your salary.

Now, here's where the superhero part comes in. If you make less than $37,000 a year, the government gives you up to $500 back into your super. It’s all thanks to this thing called low-income super tax offset (LISTO) .

What if you're a super saver and your salary plus your super contributions are more than $250,000? You’re looking at Division 293 tax . Essentially, it cranks up your concessional contribution tax rate to 30%.

And what if you're making contributions from your after-tax income (non-concessional contributions)? You can relax, because you won't be paying any contributions tax on these.

So, why do a lot of Aussies choose to make 'concessional contributions' to their super?

It's because the government could give them back some tax money for it. It's like getting a pat on the back from the tax office for saving for your future. And if you're someone who pays a lot of tax, this could be a clever way to pay less and save more for when you're older!

Even better, if you’re someone with a personal tax rate higher than the 15% tax on concessional contributions, you're in for a treat. Stuffing more money into your super could be a clever way to pay less tax and save more for a happy retirement.

Now, why opt for superannuation to save for your sunset years? The answer is simple. Super showers you with tax benefits you'd probably never get if you invested under your personal name.

The maximum tax rate on your super's investment earnings is only 15%. And if you hold an asset for over 12 months, your capital gains tax could be as low as 10% because of the 12-month CGT discount rule .

Then here comes the grand finale. When you reach 60 and decide to tap into your super, it's all yours—no tax! You can choose to withdraw it or put it into an account-based pension. If you choose the latter, any investment returns you earn are completely tax-free.

We get it, everyone's financial situation is a unique tapestry. What works for one person may not work for another. So, as we always say, what we showed above serves as a general guide only.

How much tax you’ll pay will ultimately depend on your total super amount, your age, and the type of contribution or withdrawal you make. So, before you make any decisions, it's always a good idea to chat with a financial advisor.

Seven ways to add more to your super

Your super, a retirement nest egg, grows with contributions from multiple sources. However, the jumble of different terms can make it feel confusing. Let's decode it together.

1. Employer contribution

Let’s return to the idea of your superannuation as a piggy bank for your retirement. Every month, your employer drops a coin (at least 11% of your ordinary time earnings) into your piggy bank. Not to worry if you're casually employed; you're still likely to receive this.

This is called “super guarantee” or “employer contributions” or “compulsory contributions”. Whatever you call it, it’s all about contributing to your financial future while you work for someone else.

Curious about where to find details about your super contributions? Your payslip, myGov account , or super account are your go-to sources.

And don't forget, your employer is expected to make super contributions at least quarterly. But things are changing, and soon employers will have to pay super alongside your salary. Imagine that—money in your super every time you get paid!

2. Concessional contributions

Besides the employer's coin, you can boost your super by throwing in some of your own. Yes, even small amounts can snowball over time thanks to the power of compound interest . Before you know it, these small payments could give you a prosperous retirement.

If you earn more than $45,000 per year, adding concessional contributions can trim your tax bill. But, there’s a cap. Currently, you can only contribute a total of $30,000 per financial year . This includes both your employer and concessional contributions.

Tapped out on this year’s limit but got spare change from previous years? Some can use their unused concessional contributions from up to five years back. It's called catch-up concessional contributions.

This benefit applies if your super balance of the previous financial year is below $500k. It’s a popular strategy for employees looking to offset huge one-time tax bills.

3. Non-concessional contributions

Then, there are after-tax contributions, another way of topping up your super. If your total super balance on June 30 this year was under $1.9 million, you can contribute up to $110,000 after-tax this financial year. It’s called the “bring forward arrangement”, but we won’t go into that today.

4. Low income super tax offset

For earners below $37,000, the government may chip in with a low-income super tax offset of up to $500 per year. The best part? The ATO works it out and deposits the money into your account. No extra effort required on your part.

5. Government co-contributions

Earning less than $58,445 (before tax) this year? The government may match your after-tax super contributions with a co-contribution of up to $500 . The government does the maths. If you qualify, they'll deposit the co-contribution directly into your super fund.

6. Spouse contributions and contribution splitting

Did you know there’s a super way to support your partner’s dreams? With this feature, you can add to your partner’s super balance from your after-tax income.

Contribution splitting is another way of supporting your partner's super. It lets you transfer up to 85% of your pre-tax super contributions to your spouse’s account.

A few hoops to jump through, but potentially worth it for couples looking to balance their super. And yes, this benefits de facto partners as well.

7. First Home Super Saver Scheme

Lastly, there's the First Home Super Saver Scheme , a boon for aspiring homeowners. This scheme lets you add up to $15k to your super account each year, earmarked for your first home purchase. You can continue adding until you hit $50k.

Just remember, getting this money back out requires following a specific ATO process. Otherwise, it stays locked away until retirement.

When can you access your super?

While it may seem like your super is light years away, it's closer than you think! You can access your super when you reach what's termed your ' preservation age '.

For the majority of Australians, it’s when they hit the big 6-0. This age threshold is the first time you can dip your spoon into your pot of super.

But when exactly can you withdraw your super?

1. You've reached the age of 60 to 65 and have decided to switch jobs or leave your employer. At this point, you can access all your preserved super.
2. If you're between 60 to 65 but still clocking in at work, there's an option called Transition to Retirement (TTR) . This allows you to tap into up to 10% of your super while you're still earning a wage. A sneak peek into your jam jar, perhaps?
3. Once you cross the age of 65, you have an all-access pass to your super, anytime you want.

But life, as we know, doesn't always stick to the script. You might encounter circumstances that call for an early dive into your super.

Here are a few scenarios where early access to your super will be allowed

1. You're unable to work or need to reduce your working hours due to a medical condition.
2. You're in severe financial distress.
3. You're diagnosed with a terminal illness or sustain a major injury.

During the Covid-19 pandemic, many Australians had to access their super earlier than expected. Take Tash, for example, who accessed her super after being made redundant. Like many others, Tash's situation was unforeseen and pressing. Fortunately, for us Aussies, the super system is also designed to protect us during sudden setbacks.

So, if you need help to access your super early, financial counsellors are a free resource in Australia. They’re always ready to lend a helping hand.

Take action this week

Have you ever taken a moment to ponder on what type of fund your super is nestled in? If you're shrugging, it might be time to lift that curtain. You’d want to make sure that you’re not one of those investing in poor-performing super funds . It turns out many super funds give back satisfying returns, and others not so much!

With that said, you might also be wondering how your super measures up. Use tools like the SuperRatings comparison on Industry Super Australia's website to keep things in perspective.

This is just a jumping-off point. There's a wealth of information in the full episode that we didn't have the space to squeeze into this article. So, put on those headphones and join the conversation with us.

Happy investing!

Tash & Ana