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How to start early with your retirement investment

Having enough money to fund a comfortable retirement can be helped by starting early, paying attention, and choosing the most appropriate way to invest your savings. In this article we look at how to get a head start on one of the most important lifetime investments - superannuation.

Getting the basics right

Retiring with enough savings to live a comfortable life means getting the basics right - like starting early, being committed to saving money, getting good advice, and having an appropriately structured superannuation investment portfolio.

Built for success

Superannuation is a great way to build long-term wealth for three key reasons. First, it’s a tax-effective scheme designed to help people save money for a better retirement. Second, super is a very long-term investment (up to 40 years or a typical working lifetime) which can take full advantage of the benefits of compound interest. Third, super can provide a number of distinct investment benefits like diversification, retirement income, and new sources of returns, which may suit all kinds of investors. Let’s look in a little more detail at these three areas.

Super can provide great tax benefits. Tax on super contributions is typically at a lower rate (usually 15 cents in the dollar) compared to tax on salary income (as high as 45 cents in the dollar). Tax can also be saved by making additional super contributions before tax, after-tax contributions, or by withdrawing money at 60 years or older, which is tax free. The table below provides an overview of tax rates for super for 2021/22.

Tax treatment 2022/23

Activity Taxable component       Conditions (if applicable)
Before tax (concessional)
(e.g. salary sacrifice contributions)            
15% Concessional contributions in excess of the $27,500 cap (plus any prior year unused cap) are taxed at the individual’s marginal tax rate (with a 15% tax offset). Contributions tax rate is generally 30% for individuals with an adjusted taxable income of over $250,000 per year.
After tax (non-concessional) (e.g. personal and spouse contributions) Tax-free The cap on non-concessional contributions is $110,000 per year if you have a total super balance of less than $1.7 million as at 30 June of the previous financial year.

If you are under age 75 and with a total super balance of less than $1.7 million you can bring forward up to two years of future entitlements, which is equivalent to a cap of $330,000 over three years (Under the ATO rules, the amount you can bring forward will be different if your total super balance is between $1.48 million and $1.7 million). If you triggered the bring forward rules in the previous two financial years, you will be limited to the caps applying at that time. 

Additional tax may apply on non-concessional contributions in excess of the cap. If excess non-concessional contributions and associated earnings are withdrawn, associated earnings are taxed at your marginal tax rate plus Medicare Levy less 15% tax offset. If not withdrawn, top marginal tax rate plus Medicare levy is applied on excess non-concessional contributions.
Investments 15% Maximum rate on investment earnings. No tax on retirement phase
Lump sum withdrawals:
If aged 60 and above Tax free
If at or over preservation age but under age 60 Tax free up to $230,000  15% plus Medicare levy if over $230,000
 If under preservation age   20% plus Medicare levy   Nil 

Note: This is a simplified tax table. For a more detailed tax table, please refer to the VicSuper FutureSaver PDS.


Compound interest is effectively a ‘free kick’ for investors in interest-earning products because interest is calculated on the accruing money balance, not on the initial money balance (simple interest). Compound interest is well suited to superannuation investments because the longer the money is invested, the greater the number of compounding periods, which further grows the investment. This principle is illustrated in the chart below (as a hypothetical example). The light grey area is the extra interest accrued from compounding. The dark grey area is the principal amount, which remains unchanged throughout the life of the investment.

Benefits and drawbacks of super

Along with tax and compound interest benefits, super can also provide investment benefits. Aside from providing long-term investment returns, a well-diversified super investment can: a) help smooth the risk of any one investment performing badly; b) provide a wider source of return and income opportunities; and c) help lower the investment cost.

There are many superannuation investment options available to suit all kinds of investors, which can provide all or some of the following investment benefits.

  • Younger investors (18 to 36 years) – this age group may be comfortable with a growth investment option. A growth portfolio typically comprises higher risk investments like shares (Australian and international) and may suit younger investors given their longer investment time horizons and greater appetite for higher risk/higher returning investments.
  • Older investors (37 to 60 years) – this age group may be comfortable with a balanced investment option. A balanced portfolio includes a variety of traditional asset classes like shares, bonds and cash, as well as newer asset classes like real assets and alternatives. Real assets are tangible, material investments like bridges, roads, direct property, airports, roads, and timber. They can provide new sources of return and portfolio protection when equity markets fall.
  • Retirees or those transitioning to retirement (55 to 60 years-plus) – this age group may be comfortable with income-producing investment products. For retirees, regular income is paid from an account-based pension (if qualified; and the amount will depend on a person’s age). A transition to retirement (TTR) strategy can be useful because it provides the opportunity for a person to access their super as an income stream while reducing work hours, supplementing their reduced salary income.

Super does have some drawbacks, however. One is that super cannot be accessed until a person reaches preservation age (60 years old if born after July 1964) and retires, or turn 65. Another drawback is that super can be complex and hard to understand for people. This can create barriers or false assumptions, which can lead to unnecessary switching, disengagement, or apathy. Finally, as an investment scheme, super carries investment risks like negative or volatile returns, illiquidity, inflation, and exposure to economic, geopolitical, climate, social and government disruptions.

Strong and effective governance and responsible investment can help to alleviate these risks, but they cannot be eliminated entirely from an investment portfolio. Members and advisers alike need to be aware of them when choosing an appropriate investment option. For more go to

It can help to talk to someone about your super – even if you just want to find out more about your investment options and how we invest your money. At VicSuper, you can get superannuation and retirement advice at no additional cost in most cases.

For more information about our advice services, go to

For more information about how we deliver different sources of investment returns for our members, go to

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