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Investment market fluctuations and your super

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Investment market fluctuations and your super

8 August 2011

You may have recently seen and heard news headlines about investment market volatility world wide. While a natural reaction is to be worried about your super, it’s important to remember that super is generally a long term investment, and that investment markets do sometimes experience volatility.

What’s happening in investment markets?

Over the past few weeks investment markets both globally and locally have experienced losses and volatility.

According to James Brookes, Plum Manager of Investments “Events such as the US Debt Ceiling debate, poor economic data in the US, the debt problems in Europe and some slowing in China have made investors very nervous and fearful of a global recession. This has led to commodity and equity prices dropping and investors moving to lower risk assets.”

What does this mean for your super?

It’s hard not to be disappointed when you see your super isn’t performing the way you hoped. In the face of this it’s important to remember that super is generally a long-term investment, one that will last your whole working life.

Keeping an eye on your super is important, but looking at investment returns on a year-by-year basis shows just a small snapshot in time and doesn’t give you the full picture on where your super is heading.

Taking into account historical investment returns, particularly five and ten year returns may give you a better indication of how your super is performing over the longer term.

It's important to remember that investment markets move in cycles and experience volatility from time-to-time. Your super’s investment performance will vary each year, but investing for the long-term gives your money a greater opportunity to grow over time, so you can reach your retirement savings goals.

Tax savings

One of the greatest benefits of super is the tax savings that come with it— super attracts lower rates of tax than most other investments (such as shares or property).

Investment returns within super are taxed at up to 15%, whereas investment returns outside of super may be taxed at up to 46.5%. Saving up to 31.5% tax on your investment return could mean the difference between a comfortable retirement and an adequate one.

Making voluntary salary sacrifice (pre-tax) contributions comes with its own benefits—not having to pay income tax on these amounts. You’ll pay only 15% tax on these contributions up to the concessional cap, which may be substantially less than the income tax you would otherwise pay.

Don't forget that once you turn 60 and have retired, you can take your entire super benefit tax-free.

You may also be eligible for the Government's co-contribution. If you earn up to $31,920 in the 2010/2011 financial year, every dollar you additionally contribute (after-tax) to your super will be matched by the government, up to a limit of $1,000. If you earn up to $61,920 you can still receive a co-contribution, but at a reduced rate. To find out more about the Government’s co-contributions, and whether you’re eligible please click here.

On the whole, super is still one of the most tax effective ways for you to save for your retirement— just remember to keep your eye on the big picture.

Your guide to investment market cycle

With everything going on in the investment markets it's natural to be concerned about your own personal financial situation. And of course this includes your super savings.

What better way to manage your concerns than to be informed - and hopefully, reassured?

We have developed Your guide to investment market cycle to give some perspective on market cycles as well as points to consider when facing turbulent investment times.
Now more than ever may be the time to be logical, realistic and prepared.

For additional information and tools, go to the 'Investor market watch' section of the web via the home page.

Need help with your super?

Our Member Services Consultants can help you with general superannuation and investment information. Alternatively, if you are a member of the Plum Superannuation Fund we can organise to put you in touch with a financial adviser through Momentum Financial Advice*.

Phone: 1300 55 7586
Email: Contact us online


* The Momentum Financial Advice service is delivered by GWM Adviser Services Limited (GWMAS) ABN 96 002 071 749 AFSL 230692.

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