For most Australians, our superannuation is likely to be the most significant financial investment we make. If that’s the case, are you paying enough attention to your greatest financial investment?
Many Australians ignore their superannuation until the final stages of their working life when they start thinking about retirement. It’s helpful to think of super as a garden – the more attention you give it and the more you nurture it, the more fruit it will bear for you. As super gardeners, we should be weeding out hidden fees and unnecessary insurances, planting investments where they’re most likely to produce fruit, and ensuring that our investments are protected from the economic climate changes.
What is superannuation?
Super is a long-term investment of money paid into an investment account by your employers or by you if you’re self-employed. This contribution to superannuation is legislated and will be managed throughout your working life for you by a super fund (more on those later). Here are five more things to remember:
- Generally employers are required to contribute a minimum of 9.5% of your salary to your super fund
- You may be able to ‘top up’ super with regular contributions or a lump sum (subject to the annual contribution caps )
- Superannuation earnings are generally taxed at a lower rate than other investments
- Superannuation is generally locked away until you’ve retired, to support you after you’ve left the workforce
- The federal government plans to lift minimum super rates to 12% by 2025.
Keeping an eye on your super
One of the primary signs of super neglect is the accumulation of multiple super accounts. This can occur when you change jobs and your employer automatically starts a new account for you in a default fund. This might not seem like a big deal, especially if you were only at a job for a short time, but each super account usually attracts its own set of account fees. Some super accounts also have inclusions like insurance that others may not.
Not all super accounts are created equal. Most super funds offer a range of investment options. Some have been known to perform better for Australians than others. This is why it really pays to stay on top of your super and make sure your employer is paying into your preferred fund.
Consolidating your super
Did you know that some of us have more than one super account? This costs the average Aussie worker thousands in fees each year. Because super is such a long-term investment, those fees can really rack up and reduce your balance over the years.
Thankfully, it’s not difficult to find out what super accounts you have, or to roll them all over into your preferred account. The Australian Tax Office website has a handy resource that does most of the work for you. You’ll need to set up a free myGov account to use their free super searching service. Once you’re set up, you can:
- See how many super accounts you have
- Find old or lost super accounts
- Easily consolidate your super.
If you get confused by any of the language you read while doing your super, you might like to check out this helpful guide to common superannuation words and phrases.
Getting advice on super
Sometimes it helps to ask for a little advice to make sure you’re properly rewarded for all of your hard work. There’s no better example of this than super.
But did you know that there are more than 40,000 super products in Australia at the moment? I’m part of a team of financial advisers who can advise you about super and help calculate how much money you’ll need in retirement.
Retirement and super
So how much super do you need for retirement? Everyone is different and we all have unique lifestyles. But this is one area of life where you really don’t want to rely on guesswork. So it helps to take a look at some research.
Every three months, the Association of Super Funds of Australia (ASFA) publishes figures that show how much a single person or couple will need when they retire. You may also want to use the ASFA’s retirement tracker to estimate what you can afford.
Your lifespan and health needs are going to come into play here too. In Australia, we’re starting to live longer. That means you may need your super to support you for up to 30 years. As a rule, the earlier you start planning your super needs, the more it’s going to help you get ready for retirement.
Remember, we’re here too if you decide you want a financial adviser to help out.