The period after retirement can be tricky phase in one’s life, especially in financial matters. When you are not employed, your income stops and you need to rely on your savings and assets to take care of your material needs.
In order to have a financially secured retirement, you need to manage your finances wisely during your employment years. The biggest and most popular method that people use to secure retirement income is investment in a self managed superannuation fund or pension fund. Visit this link https://www.arrowfa.com.au/self-managed-super-funds/ for more information regarding self managed superannuation fund.
Superannuation fund can mean any fund, financial scheme or plan that will provide the investor with a fixed sum either on a regular basis or one time. A self managed superannuation fund involves a huge amount of money and also plays an important role in share market activity. Both private and public pension funds exist in countries around the world. There are mainly four types of superannuation funds, employer superannuation, personal superannuation, industry superannuation and corporate superannuation.
According to the estimate of US finance giant Morgan Stanley, globally pension funds have over $20 trillion in assets. This is the largest category of investment in the world ahead of mutual funds, equity, currency reserves etc.
Government Pension Investment Fund of Japan is the largest public superannuation fund in the world with $1.5 trillion. Generally public and private funds are managed by separate laws. Although during the global financial crisis, pension funds lost money, their importance remains very high. Although in the aftermath of the crisis, it is advised by financial experts, that investors should be more careful about managing their superannuation funds.
If you are running a superannuation fund, you need to remember a few important things. If you look at the balance sheet of any pension fund, you will find that there are two sides. One side consists of assets and the other side indicates liabilities. A superannuation fund can only work properly if there are enough assets to cover the various liabilities. The problem during the financial crisis was that assets were reduced significantly and as result many pension funds saw the increase in liabilities and it exceeded the assets.
While it is major problem as it is, things can get even worse if there is an increase in liabilities in corporate superannuation. If this happens, the corporate firms respond by dismissing employees or sending them into early retirement. To protect your money in case of any financial crisis, you should take certain measures.
Perhaps the most important measure is creating a big enough buffer with superannuation fund. According to experts, the assets in a superannuation fund should exceed liabilities by at least 15%. This buffer should be put together when things are running normal. This is considered minimal as more buffers is better but it also becomes more difficult to reach.