How to get your super on track
Your superannuation is a potential savings superpower. But only when it's set up and managed correctly.
And the sooner you create a plan for your retirement that makes the most of your super, the better off you'll be come retirement.
But that doesn't mean it should be rushed. It's important to take the time to get it right.
Let's look at some of steps that could help you get your super on track.
Treat this as a general guide to help get you thinking about your super. But please get tailored financial advice before you make any major decisions.
Getting the most out of your super contributions and investments is important for your retirement and can have tax advantages too.
1. Take a look at super fees
Super funds charge fees for different reasons and at different rates depending on what it's for. Common fees include:
- Admin fees
- Investment fees
- Buying/selling fees
- Personal advice fees
- Insurance premiums (if included)
It's important to make sure you're not overpaying on fees.
BUT...don't fall into the trap of comparing super funds based only on fees.
Just like a more expensive car might offer more comfort and safety features than a cheaper model, a super fund charging higher fees may be offering more. This might be better investment returns, flexible investment options, plus advice and other services to members.
It's important to look at what you're paying. But think about fees as part of the overall picture and what's right for your life stage and plan.
2. Check your fund's performance
One of the main reasons super funds charge fees is for investing your savings. The aim is to deliver a healthy return to grow your money.
Here are some tips to think about when looking at your fund's performance compared to other options:
Look at net returns (what your fund has delivered after fees are deducted)
If you're comparing options, make sure you compare apples with apples — look at the returns of equivalent investment options from other providers
Look at long-term performance (not the fund that performed best last year)
Remember that past performance doesn't guarantee future performance — it just shows what a fund has been able to deliver in previous years
3. Match your investments to your risk tolerance and goals
When your super account was opened first, you may have been opted into a default investment option.
But is this actually a good fit for your current life stage and how much investment risk you're comfortable with?
Most super funds have a range of options that invest members' money in different types of assets.
- On one end of the scale, there are options that aim for high growth (usually with more investment ups and downs along the way).
- Then there are more conservative options that aim to minimise volatility (usually with relatively low returns).
- There are also options to invest your money based on your ethical preferences, or ones that give you more control over picking specific investments.
Whatever you choose, it's important to consider your life stage (have you time on your side to ride out bumpy investment returns?) and your risk tolerance.
This is where getting good financial advice can be invaluable.
4. Consider extra repayments
Choosing a suitable fund and investment option are good ways of optimising your super.
Making extra contributions can help you super charge it.
Generally your employer must pay a portion of your salary into your chosen super account. But you can also make extra voluntary contributions.
There are two main ways of doing this:
Asking your employer to make extra contributions on your behalf from your pre-tax salary (known as salary sacrificing).
These are called concessional contributions.
Make contributions to your super from your after tax salary (non-concessional contributions).
If you're a low or middle income earner you might be eligible to receive a matching contribution from the government.
There are annual limits on how much you can contribute using each of these options. They are also treated differently for tax.
The important takeaway here is to look at your monthly budget (plus any lump sums of cash you get during the year) and consider your super as a way of putting your spare cash to work. It can make a huge difference.
5. Only consolidate your accounts if you've checked it's right for you
If you have multiple super accounts, consolidating them into a single one is often recommended.
Usually the suggestion is that it's a way to save on fees.
BUT... it's not always this straightforward.
For example, if you consolidate low-fee super accounts into a high-fee one, or one with unsuitable investment options, you could end up worse off.
There's also a risk you could lose insurance cover. This is because any life, disability, and income protection insurance policies attached to a super account may be terminated when the account is closed. And you mightn't be able to get the same cover through a different account.
In short, you need to carefully weigh up the pros and cons.
This brings us on to the final step to consider...
6. Get professional advice
Super is incredibly important. It can also be incredibly complicated.
And the most suitable approach varies massively from one person to another.
This is why getting professional advice based on your individual situation can be a total game changer.
A qualified financial advisor can:
1
Help you understand your retirement goals and risk tolerance
2
Advise if your current fund and investments are suitable
3
Help you maximise your contributions
4
Guide you on what to do if there are market crashes that impact your super
5
Advise if the insurance you have in your super is appropriate for your needs
You may be able to get some basic financial advice relating to your super account from your own fund. Or if you want more comprehensive advice, you could consider an external financial planner.
Important information: Any advice or information on this site is of a general nature only and has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your personal objectives, financial situation, and needs. Helen Baker is an Authorised Representative(s) of Godfrey Pembroke Group Pty Ltd ABN 38 078 629 973, AFSL number 245451, an Australian Financial Services Licensee, with offices at The Bond, Level 3, 30 Hickson Road, Millers Point NSW 2000.
