It’s important to learn about your superannuation fund as early as possible. Understanding your super fund can take some of the guesswork out of planning for retirement. For example, it’s important to know what you’ve earned when your pension age arrives.
It’s also important to plan so that you can continue to live the lifestyle that you desire. With this in mind, you can never start planning for your financial future too soon.
More than likely, you know the current balance of your super fund. However, how do you know if it’s enough to maintain a comfortable lifestyle during retirement?
To learn everything you need to know about pension super balances, keep reading.
What Is the Pension Age in Australia?
Currently, the pension age in Australia is 66 years old or older. An evaluation of your income and assets would determine how much you’d receive.
You’ll need to consider a few things in the years leading up to claiming your Age Pension. Primarily, you’ll need to determine when you’re eligible to receive funds.
Slowly, the eligibility age for Age Pension has been increasing from 65 to 67 years old. It will continue to do so by six months every two years.
For example, if your birthday were to fall between 1 January 1954 and 30 June 1955, you’d have eligibility for the age pension as of 1 July 2019. If your birth date fell between 1 July 1955 and 31 December 1956, you could access benefits on 1 July 2021. Finally, if your birthday falls any time after 1 January 1957, you’d have eligibility for the age pension once you reach 67 years old.
When you claim your age pension, you must have Australian residency. It’s also important to understand that ongoing income can reduce your pension.
When the day comes, an age pension assets test can help you establish whether you can receive funds. It will also tell you whether you can receive benefits such as carer payments and disability support. Furthermore, the test will tell you how much you can receive in each category.
How Much Is the Aged Pension in Australia?
You might ask, “How much is the aged pension?” Well—that depends.
The Age Pension rate is different for single individuals and couples. The Department of Social Services reviews and adjust the rates regularly.
The department bases the adjustments on the Consumer Price Index (CPI). With this comparison, they’ll establish maximum rates for Age Pension payments.
Currently, the maximum basic rate for Age Pension payments is $860.60 for individuals and $640.70 for each member in a union. The maximum pension supplement is $69.60 and $52.50 for each member of a couple.
The energy supplement is $14.10 for an individual and $10.60 for both parties to a union. Altogether, individuals can currently receive up to $944.30 in super fund benefits. Meanwhile, couples can receive a combined total of $1,423.60.
When Will the Old Age Pension Stop in Australia?
At one point, the Australian government planned to increase the pension eligibility age until it reached 70. Relatively recently, however, the prime minister has announced that they plan to do away with that scheme. In 2018, Prime Minister Scott Morrison announced the decision, even before it was formally established.
Already, eligibility age has increased from age 65. As originally planned, the government has raised the Age Pension age six months every two years.
Now, Morrison has expressed that this is no longer necessary. For this reason, the eligibility age increases will stop in 2023, when it reaches 67.
When Is the Next Aged Pension Increase?
Still, the age pension eligibility age has increased gradually from 65 to 67. On 1 July 2019, it went from 65 years old and six months to 66 years. Then, anyone born between 1955 could claim benefits.
If a pensioner were born after 30 June 1955, they might have an eligibility age of 66 years and six months. However, they may also have an eligibility age of 67. The exact eligibility would depend on their birth date.
The next scheduled eligibility increase may take place on 1 July 2021. However, it could happen as early as 20 March 2021.
Your age, along with the results of your assets and income tax tests, will determine your eligibility to collect funds when you retire. Also, the government will continue to adjust rates every March and September.
Furthermore, the government will adjust the lower limits for age pension eligibility in July of each year. Again, the Australian Bureau of statistics will base any changes on the CPI.
Planning for Retirement
The Association of Superannuation Funds of Australia (ASFA) provides estimates for the super fund program. The ASFA estimates that couples need $640,000 to continue to support a comfortable lifestyle.
Meanwhile, a single individual would need $545,000 for a secure retirement. These estimates assume a partial Age Pension.
The association estimates that the Age Pension can meet the basic needs of a modest lifestyle. You’d need $70,000 a year to continue living comfortably based on ASFA calculations.
It helps to understand this process to ensure that you can continue living the lifestyle that you desire. Today, many people live well into their 80s.
You may want to stop working when you turn 65. If so, you might need retirement funds to last 20 years or more.
With this in mind, the current balance of your super fund may concern you. However, you shouldn’t make rash decisions based on the current market. With planning, you can boost the amount of your super fund as needed.
Boosting Your Super Balance
With a long-term approach, you can boost your super fund balance. You can do so by making additional contributions. As an example, you might consider salary sacrifice. With this method, you’d contribute extra before-tax funds to your super.
If you earn less than $250,000 per year, you’d only pay 15% tax on your contributions. If you make more than $250,000 per year, however, you’ll pay 30% on taxes for your contributions.
It’s important to ensure that your combined voluntary and employer-contributed contributions don’t exceed $25,000 per year. Your payroll department can help you to establish a salary sacrifice.
Alternatively, you may have reasons to want to make personal tax-deductible contributions. For example, your employer may not offer a salary sacrifice program. This method is also an option for self-employed individuals. There are also other reasons why people prefer not to make a salary sacrifice.
In this case, you can contribute personal tax-deductible funds to your super. Again, the contributions are taxed at 15% if you earn under $250,000 each year. Your contributions will get taxed at 30% if you earn more. Personal tax-deductible funds are also subject to a $25,000 a year limit.
Accessing Super Funds
You can access your super funds when you retire and reach preservation age. Your preservation age depends on your birth date. Around the world, the preservation age varies. Depending on your birthday, however, the preservation age in Australia is between 55 and 60. There are also special circumstances that allow you to access your super early. For example, you may become incapacitated.
In this instance, you can access your super fund because you cannot work. Alternatively, you may have to work fewer hours. You may also access your funds if you’re experiencing severe financial hardship. In some cases, you can access your pension age funds if you’ve been receiving Commonwealth benefits for 26 weeks or more. There also other special instances where you might gain access to your pension age funds.
Still, you might reach your preservation age and decide not to retire. If so, you can claim part of your super through a transition to retirement pension. Yet other people have a defined benefit fund. In this case, they can access their super funds at the age of 55. With a defined benefit fund, your exact birth date doesn’t determine your eligibility.
Still, you’d need to check with your funds to determine exact eligibility requirements. With a defined benefit fund, the eligibility requirements vary with every fund.
Sometimes, it can prove challenging figuring out when you’re eligible to access your super fund. A pension age calculator can help. The calculator will help you to assess when you can access your Age Pension.
Let Us Help You Prepare for the Future
Now you know everything you need to know about pension age and pension super balances. What you need now is a fund that aligns with your Islamic ethical beliefs.
Crescent Wealth Super gives back to the community. What’s more, we actively avoid investments in industries such as alcohol, gambling, tobacco, weaponry and interest-earning organisations.
With Crescent Wealth, you can rest assured that we’ll invest your funds in profitable, asset-based instruments. However, those instruments will contribute to the advancement of humanity and support community engagement.
Contact Crescent Wealth Super today at 1300 926 626 or connect with us online to learn more about protecting your superannuation, while serving as a steward to humanity.
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