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Self-funded retirees

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superlowerfeesinsideIt would be a shame if, after years of working, Australians reached the 'golden years' of retirement and had no retirement nest-egg saved up to enjoy them with.

The government wants to avoid that scenario by encouraging self-sufficiency in retirement (to help take the burden off the social security payments for those who really need it), and does so by guaranteeing all Australian workers that a percentage of their employment income (currently a minimum of 9%) will go into a superannuation fund.

Superannuation is an investment of your money that is designed to help you save for retirement. Money put aside from your salary gets invested into a 'fund' during your working life which you then access upon retirement. The idea is that over many years the fund grows and builds up value to a point that allows you to live in financial security in retirement, without needing to rely upon the government's means-tested pensions.

Super plays a huge role in ensuring Australians are able to enjoy their retirement without relying upon social welfare. It is also taxed at a lower rate than other investments or salary, so the system is designed to entice you to save for your own retirement since you'll get a better after-tax return.Some super funds offer additional benefits, such as life insurance cover, and total and permanent disability insurance.

People who fund and support their own retirement without receiving any Australian government means-tested pensions are known as self-funded retirees. Just because they're independent, however, doesn't mean they miss out on some of the particular benefits of getting older – self-funded retirees are still able to access concessional rates for travel and health.

There is an income cut-off limit for pensions, and a reducing scale up to that cut-off, but you should check as they change (here's the Centrelink page with that information). Because the government appreciates the efforts of self-funded retirees (who are essentially helping to take the pressure of the pension system by supporting themselves), it introduced a number of taxation relief initiatives, as well as the provision of the Seniors Health Card and the Seniors Supplement.

To find out more about self-funded retirees and some of the benefits they receive, read Superannuation: Self-Funded Retirees.

Last reviewed 26/07/2012