Take Charge of your Super & Receive Big Dividends Later
Figures quoted by the Association of Superannuation Funds of Australia show that Australians aged under 30 years usually have less in their bank accounts than in their super funds. Despite this, 40 percent of those surveyed don’t know their super balance. A further 16 percent admitted they only had a rough idea.
Retirement seems a long way off when you’re young and enjoying life to its fullest. Planning for it now can almost pointless at such an early stage. But do you know this is the best time to take charge of your super fund contributions? Doing so now will open up more options for you later as you provide you and your family with the financial freedom you will need.
If you're looking to speak to someone about taking control of your super speak to our Melbourne based SMSF specialist team.
This will allow you to do what you’ve always dreamed of doing such as travelling, or paying off all your bills. Or maybe you want the option to retire earlier than you thought possible? Or to start that small business you’ve always thought about?
Small changes made now to your super contributions will have a big effect on your retirement. A small, additional monetary sacrifice now will mean your extra payments will earn more through compounding interest in the years ahead. You may be adding more than 30 percent extra to your retirement nest egg!
Rather than let your current super fund drift along, you need to be right on top of how it can work for you. For example, do you know how much is in the fund or where it is being invested on your behalf?
There are considerable advantages in keeping on top of your super at any age. Doing so when you’re young gives you even more advantages, and provides you with the chance to really get the best out of your fund. Treat your super as you would a trust fund and work out early how it can work for you. This may make all the difference when you finally retire.
Starting early
Correctly planning your super contributions — and choosing your own personalised fund — will pay major dividends when you retire. For example, selecting the right fund, tailored to your lifestyle and preferences, will allow you to put away extra money now that will build up in your fund over time. As little as an extra $50 a month for younger people could mean avoiding having to find $1000 per month playing catch up further down the line.
It’s not just about fees
Your superannuation fund used to be chosen for you by your employers, which would give you little input into the type of fund that would suit your situation the best. While this is still the case for some industries, such as those in which super funds are selected as part of an industrial award or an enterprise bargaining agreement, in most cases, the employee now has the option to choose. Check with your employer to see if you have this option. If so, make sure you shop around to find the fund most suitable to your needs.
Many people ignore the added benefits of smaller funds in favour of the lower fees offered by the larger super funds. While low fees are a key factor, it is important to examine the functionality of a fund, as well as the fees.
Check out our Melbourne SMSF Guide.
Set aside time to go through each fund provider's website and consider performance over the long term. Consider the insurance benefits and whether or not you are comfortable with the risk. Weigh up the risk and returns of each fund, and think about how suited the fund is to your changing needs and if it appears to be aligned with your long term lifestyle goals.
Changing your super fund in the future
Always keep an eye on your fund’s performance. Rather than just checking the short term returns, the Australian Securities and Investment Commission recommends viewing a fund’s performance in comparison with others over a five year period before making any decision to change.
However, the ease of being able to leave should always be a factor in determining whether or not you join in the first place. Does the fund charge excessive exit fees? How does leaving affect your employer contributions and such benefits as connected life and health insurance?
Treat your super as a trust fund
Managing your own superannuation is not recommended unless you have financial and investment expertise, but being aware of how your fund works and how to maximise it to your advantage is a big step forward.
One way to boost your savings is to view your super differently. Instead of just associating it with retirement, look at it as a trust fund, which, if correctly managed, will pay your bills when it matures while also providing you and your family with an income to live on for life.
Invest ethically
Do you know where your super is invested? This is becoming more of an issue as people become more concerned about issues such as climate change, animal rights and human rights abuses. For many people, where their money is invested is as important as the rate of return.
Ethical investing works in two ways: by screening out “negative” investment — such as companies in the fossil fuels industry — and focusing on “positive” options such as funds that specifically target green energy or carbon credits.
Making the most of your superannuation means recognising its relevance at every stage of your working life, and not just when you are on the verge of retirement. Affordable sacrifices made now will pay major dividends over the years and lead to a more comfortable retirement lifestyle. It’s necessary to take charge of your contributions now, while the most benefit can be made.
Check your super balance at least quarterly and manage your contributions depending on your changing life circumstances and lifestyle plans. Discover the ways to maximise the fund for tax advantages, understand how to compare funds and get the best, safest and most ethical returns possible.