What’s the second biggest asset you’re most likely to accumulate in your lifetime after your home? Hint: it’s not your car. Give up? It’s your super. Yep. That chunk of money that gets put away every fortnight sure adds up. Yet, we don’t really pause to give this a second thought. In fact, some of us don’t even see it as our money.
Why give a damn about your super?
Because it is your money. And what you do with it today determines the kind of lifestyle you will enjoy in your retirement. So here are a few helpful hints to get you on your way to making the most out of super.
1. Take control.
According to the FSC/ ING DIRECT Your Super Future Report 2015, over 68% of Australians simply stick with their employer nominated super. If you have a choice, pick a super that’ll help you achieve your goals.
2. Don’t double dip.
If you’ve worked more than one job, chances are you have more than one super account. A little bit of housekeeping here will not only save you the hassle of managing multiple accounts, you may also save on fees and insurance premiums. Consolidating is easy. You can do it with a few clicks.
3. Watch out for the ‘F’ word
We mean fees. Over time, they can burn a big hole in your retirement income. Just how big a hole? Research commissioned by ING DIRECT (January 2015) found that annual super fees can range from 0% to around 2.33%. That means on a balance of $50,000, the annual fee imposed by the super fund could range from $0 to $1,165 per annum. Due to the power of compound interest, that $1,165 per annum in fees will add up substantially over the longer term. The research showed that a 30 year old could be 60% or $192,000 better off in retirement if they switch from a super fund charging fees of 2.33% to a 0% option. (Deep breaths). If you want to know how much fees could be costing you, try this calculator.
4. Top up to be on top.
With cost of living rising all the time, one way to increase your retirement income is salary sacrifice. Not only could you be giving less to the taxman, the amount stacks up over time. Want to know how you can boost your super? Check out this handy retirement planner. Don’t forget to keep an eye on your contributions caps to avoid any unnecessary excess contributions tax.
5. Match your options to your goals and life stage
Your choice of investment strategy should be guided by the retirement lifestyle that you want, but it’s important to balance growth with risk. Generally, when you’re young, you can afford to take more risks. But as you near retirement, you may want to switch to less volatile cash options. Super can also cater to different levels of comfort and investment knowledge. If the mention of Exchange Traded Funds makes you go cross eyed, you can choose Living Super’s balanced option. On the other hand, if you fancy yourself as a Warren Buffet of sorts, you have the option of trading shares online, in real time.
The information is current as at publication and is based on research contained in the January 2015 RiceWarner Superannuation Fees and Performance report commissioned by ING DIRECT. Super fees include investment and administration fees but not buy/sell spreads or indirect costs. The FSC ‘Your Future Super’ 2015 Report states that super is the second biggest asset that most people will accumulate during their lifetimes.