Retirement Savings Account

Your retirement funds are some of the most important of your life, after working hard for most of your life, you want to be able to relax and live a lifestyle of leisure, and whether that includes gardening, restoring a classic car and spoiling your grandchildren, or overseas holidays, a number of expensive cars and a bathroom and kitchen renovation, you need to know your retirement savings will be there for as long as you need them.

Featured Savings Account

The UBank USaver is one of the newest and most revolutionary savings accounts. One of the highest rates on the market today, and backed by one of the Big Four banks so you know your money is secure. It is free to open an account.

• Maximum Rate: 5.51%
• Standard Variable Rate: 4.91%
• Bonus Rate: 0.60%
• Monthly Account Fees: $0
• Minimum Balance: $0
• Minimum Deposit: $0

Read the UBank USaver terms and conditions

What is a Self-Funded Retiree?

In Australia we are lucky enough to have a pension system which can assist Australians who have retired, to pay their bills and live their lives from tax payer contributions, after they themselves have spent their life paying part of their wages to the ATO. However, an Australian pension is not enough for most retirees to live out their dreams of expensive holidays and fancy cars, so it’s doubly lucky that the next generation of retirees have realised that they are going to live longer and are going to have to plan for their retirement, and so have invested cleverly and regularly in their retirement fund.

These retirees will be self-funded as they won’t need to rely on a government pension to get by, they’re going to be able to do much better than just ‚Äògetting by’ if they have invested well. Changes over the last decade to retirement funds have meant that retirees also have a number of options their paren’ts never had, and they can choose to:

• Keep their retirement funds in their superannuation fund, with a designated superannuation provider.
• Choose any other Australian super fund they like.
• Open a self-managed super fund.
• Open a retirement savings account.

Differences Between a Self-Managed Super Fund and a Retirement Savings Account

Superannuation funds have been operating for many years and we all know that our employers are contributing 9% in addition to our wages into our chosen fund, so are self-managed funds and retirement savings accounts the same thing? No, these are the differences:

Self,managed super funds:

• Must be registered by your accountant, and have their own ABN.
• Must have trustees appointed.
• Trustees can be members of the superfund, so you can be your own trustee.
• Must have four or less members.
• No trustees can receive remuneration for their roles.
• Beneficiaries of the funds in the super fund must be established.
• You choose what your super fund invests in and you control the payments to members, that is, your payments.
• Setting up a self-managed super fund is essentially creating your own independent fund, just like any other super fund an Australian can choose, except you are the manager of the fund, and only three other Australians can choose to join you.

Retirement savings account:

• Can only be used as a super fund and for your super contributions if opened with an authorised provider.
• Your funds are not invested, and instead grow through the interest calculated on the savings account.
• Is a capital guaranteed account and contributions and interest can only be reduced through fees, not fluctuations in investments or markets
• Is not its own entity, but is an account offered by a financial institution.
• Typically charge less fees than super funds and usually flat fees, depending on the provider.
• The more conservative earning power of a retirement savings account means it can be harder for the account to stay ahead of inflation over a long period.

Benefits of a Retirement Savings Account

If you’ve shopped around the Australian superannuation funds and not found one which suits your needs and lifestyle, and you’re not interested in taking on the added pressure of managing your investments, then a retirement savings account may be for you.

Why choose a retirement savings account (RSA):

• Retirement savings accounts can only be opened with an authorised provider.
• The account is not investing your hard earned contributions in shares, property or other investments, but holding it safely in an account to earn interest.
• You can start to receive the benefit payments from your retirement savings account when you are at least 55 years old, and retired.
• Benefits can be paid early in the event of your death, permanent injury or severe financial hardship.
• Benefits will be paid out if you are between 65 and 75 and not employed in full-time or part-time work.
• Benefits will be paid out if you are 75 years or older and not employed in full-time work.
• Your capital in a retirement savings account is guaranteed and can only be reduced by fees on the account, fees and charges on retirement savings accounts differ depending on the provider.
• Retirement savings accounts generally charge set fees and sometimes no ongoing fees at all, where super funds can charge up to 3% in fees, plus transaction and termination fees.
• For balances less than $1,000 the provider of a retirement savings account is not allowed to charge fees which exceed the interest earned.
• Your account is completely portable and you can easily move your funds to another RSA or to a managed or self-managed super fund.
• Retirement savings accounts have the same concessional tax rate as super funds, of 15%.
• Interest earned from an RSA is also taxable at 15%.
• When you receive a pension or payment from your retirement savings account you don’t have to pay tax on it as investment income.
• You will have the option to have insurance included on your funds, for additional fees depending on the provider.
• The conservative nature of an RSA means your funds won’t diminish in times of poor investment market performance, however, this conservative nature also means it is possible that the funds in your account won’t beat inflation over the longer term, therefore, consult your accountant or financial advisor before making the final choice of retirement savings account.

How to Open a Retirement Savings Account

Your retirement savings account is not a separate entity, but an account offered by a government approved provider which may be a bank, credit union, life insurance company or eligible financial institution. As at October 2009 approved providers include:

• Bananacoast Community Credit Union Limited
• QANTAS Staff Credit Union Limited
• Hunter United Employees’ Credit Union Ltd
• Queensland Country Credit Union
• Police Association Credit Co-operative Limited
• Savings and Loans Credit Union (SA) Ltd
• Queensland Police Credit Union Limited
• Defence Force Credit Union Limited
• Commonwealth Bank of Australia

If you want the freedom and financial security of being a self-funded retiree, why not find out more about a retirement savings account because it just might be the right option for you. Chances are it’s not too late for you to take charge of your future, and ensure your golden years are filled with all of your retirement dreams.