Get more from your superannuation with these simple ideas
If you could easily add $60,000 to your super fund in a decade, would you do it? Of course you would!
Getting “free money” may seem like a fantasy. Yet that’s exactly what you’re missing out on when you simply leave your super in funds that both underperform and charge you high fees. You may be reducing your superannuation fund balance by at least that $60,000.
It’s tempting to write off your super as simply something for your future self to worry about. Yet the truth is, your superannuation is probably the biggest investment you’ll make after your home. That’s why you’re doing yourself a disservice if you don’t take the time to understand how that investment works.
It can be a costly misjudgement. The recent Productivity Commission estimated that super members would gain almost $4 billion a year simply by ridding themselves of underperforming funds and reducing fees by consolidating their accounts.
The result? These simple changes can give a 55-year-old today an additional $61,000 by the time they retire; and a 20 year old an incredible extra $407,000 when they retire at age 65.
Let’s take a look at four simple ideas that will make a real difference to your superannuation returns.
1) Match your investment option to your timeframe and goals
Most funds have at least a few options for investing your money, such as growth, balanced, diversified, or conservative. It’s important that you understand the difference, and invest your super funds in the option that best suits your stage of life and your goals for retirement.
If you’re young and have many years ahead before you retire, a fund with mainly growth assets may make sense for you. On the other hand, your age may not even matter if you just can’t stand the thought of exposing your funds to market volatility. In that case, you may prefer to invest your money in a more conservative option.
2) Choose the right asset allocation
Once you know how you want to invest your funds, compare the long-term performance (by which we mean at least over 5 years) of different funds in that category.
When you do this, make sure you compare “apples with apples” – ie. growth funds to growth funds, balanced funds to balanced funds, and so on. Be aware of differences between funds in the same investment category. Not all growth funds are the same, and not all balanced funds are the same!
As the ads always say, a fund’s historical performance won’t guarantee its future performance. But getting your asset allocation right, with a cost-effective fund manager who has a good history, will set you up well.
3) Consolidate your super to reduce fees
If you have more than one super fund, consolidate them to eliminate unnecessary fees. This is actually a very easy thing to do, and in most cases your super fund will do the work for you. Just be sure to check how your insurances will be affected, before you amalgamate your funds.
4) Understand your super fund’s expenses
If you’ve spent any time recently watching the property markets and daily movements in the share market, you’ll realise that you can’t control everything!
Yet you can control your fund’s costs, and that’s something that will make a large difference to your super returns over time. The costs of an average super balance range from $400 to more than $2,000 each year – so you can see it pays to know your fund’s expenses.
Finally, don’t be tempted to constantly change your investments. Getting it right initially will add value, while constant tinkering is likely to hurt returns.
Talk to Henderson Matusch for advice on your superannuation
Understanding your super and being patient with it can pay dividends, and ultimately deliver you the retirement you’re aiming for. And if it all seems overwhelming, speaking with an expert can help steer you through with the right advice. Call Henderson Matusch on (07) 3229 3688 or fill out the simple contact form here.