This dictionary defines essential terms related to retirement planning in Australia.
Account Types:
- Superannuation Fund: A specialized account that holds your retirement savings. You can have multiple super accounts throughout your working life.
- Traditional IRA (US): An individual retirement account in the United States with tax-deferred contributions and taxed withdrawals in retirement. (Not directly applicable to Australia)
- Roth IRA (US): An individual retirement account in the United States with after-tax contributions and tax-free withdrawals in retirement. (Not directly applicable to Australia)
Contributions:
- Concessional Contributions: Pre-tax contributions made to your super fund, reducing your taxable income.
- Salary Sacrifice: An arrangement where you agree to receive a lower salary in exchange for your employer making a concessional contribution to your super.
- Non-Concessional Contributions: After-tax contributions made to your super fund, subject to contribution caps.
Investment and Fees:
- Investment Options: Different investment choices within your super fund, varying in risk and potential return (e.g., shares, bonds, cash).
- Investment Strategy: An approach to allocating your super savings across different investment options based on your risk tolerance and retirement goals.
- Management Fees: Fees charged by your super fund to cover administration and investment management costs.
Retirement Income:
- Retirement Age: The age at which you can access your superannuation savings. The Australian Government is gradually increasing the retirement age.
- Pension: A regular income stream received in retirement, often from an annuity or defined benefit super fund. (Defined benefit funds are rare in Australia)
- Annuity: An insurance contract that provides a guaranteed income stream for life in exchange for a lump sum payment.
- Lump Sum Payment: A one-off payment of your superannuation savings upon retirement.
Government Programs:
- Australian Taxation Office (ATO): The government agency responsible for administering superannuation taxes and regulations.
- MoneySmart: An ASIC initiative providing financial education resources, including information on superannuation.
- Age Pension: An income support payment from the Australian Government for eligible retirees.
Other Key Terms:
- Consolidation: Combining multiple super accounts into a single account to reduce fees.
- Rollover: Transferring your super savings from one fund to another.
- Estate Planning: Planning for the distribution of your assets, including your superannuation, after death.
- Beneficiary: The person or entity who will receive your superannuation savings upon your death.
- Required Minimum Distribution (RMD) (US): The minimum amount you must withdraw from your retirement accounts annually after reaching a certain age. (Not directly applicable to Australia, but a useful term to know)
Note: This is not an exhaustive list, but it covers many of the essential terms you’ll encounter when planning for retirement in Australia.