You can also nominate your own self managed superannuation fund. This is a personal fund that you run and the Australian Taxation Office has to approve it. If you use a good investment strategy, you can be able to save a substantial amount of money for retirement. As an illustration, consider a person who is twenty years old today and assume that he/she works for a period of forty years. Assume that this person earns about 62,000 dollars per annum and his/her 9 percent super is included in that figure and that his/her salary increases by 2 percent every year.
If this person retires at the age 60 and achieves an average return of 6 percent per annum, he/she would have about 1,095,000 dollars. The person’s average income would be about 132,000 per annum. This income is less than ten years of his/her pre-retirement income. However, if the rate of returns was 8 percent per annum, the final balance would be about 1,800,000 dollars, which is 700,000 dollars more.
The greatest concern is what you can do to maximise your returns from a superannuation fund. Avoid making the mistake of investing in mutual or balanced managed funds where about fifty percent of your funds will be invested into fixed interest or cash investments. You should only do this if you want to use some of the money you invested within the next three to five years and you do not want to invest in the stock market where stock values may fall. If you invest in a self managed super fund you will not get your money until you reach retirement age. This means that if you are twenty years old, you will continue making contributions to the fund for a period of forty years. If you are fifty years old, you have a period of ten years before you can start using the funds.
If you have five years before you reach retirement age, it is wise to invest a hundred percent of your money into growth assets. Do not worry much about the risks involved. This concept is similar to making the decision to invest your money into CBA or NAB shares for ten or twenty years instead of investing it into one of the term deposit accounts of these companies. This is what most people do when they opt for a balanced approach to investing through their own funds or an industry fund sponsored by their employers.
You can also grow your super by using the government contribution scheme. If you qualify fir this scheme, you can gain returns of 100 percent per annum. If you earn less than 61,919 dollars per annum, you can receive a pro rata contribution to your super from the government for each dollar you contribute up to a maximum of 1,000 dollars per annum. If you earn 31,920 dollars or less per annum and you make a contribution of 1,000 dollars to the fund, you will receive a full contribution of an additional 1,000 dollars from the government. This is a 100 percent return on you money. With the power of compounding, you can set aside a large amount of money in your superannuation after a period of ten, twenty or forty years.