Money and Life
(Financial Planning Association of Australia)
Does your super deserve a clean bill of health? Managing your super might seem tricky, but it doesn’t need to be. With a few simple tweaks, you can put the basics in place to last you a lifetime. Here’s how to do a quick and easy health-check on your super.
It’s likely that your super will provide much of your income in retirement, so it’s worth spending a little bit of time upfront to get it working for you. Here’s what you can do now, to make sure you’re on track for a comfortable retirement.
Consolidate your accounts
Consolidating your super into one account makes it easier to manage, plus, you’ll save a fortune in fees. That adds up to a higher account balance when you retire. It’s easy to consolidate your super using the Australian Taxation Office’s (ATO) online services, accessed via your MyGov account.
Before you consolidate your super, do your research and choose the best super fund for you. Also check your insurance cover and make sure you can get similar cover with your new fund. This is especially important if you’re over 40 or have a pre-existing medical condition.
Check for ‘lost’ superannuation
Nowadays it’s really easy to find any ‘lost’ or unclaimed superannuation. Super providers are required to pay all low and inactive account balances to the ATO, who hold onto it until you make a claim. The ATO will then transfer your funds to the super account you nominate. To check whether you have any lost super, simply log into your MyGov account and click on ‘Manage my super’.
Compare your fund’s performance
How well your fund performs can have a big impact on your retirement savings. That’s because superannuation isn’t just a way of saving for retirement. Rather, when your employer pays money into your super, the funds are invested on your behalf by your super provider, with the aim of generating a return.
Keep an eye on how your super is performing by checking your annual account statement. Always look at the returns over a longer time period, like five or 10 years, as this eliminates any short term volatility.
If you’re choosing a new fund, check their investment performance on their website. Always compare like with like, for example, a balanced option with another balanced option, over the same time period. If you’re not sure whether your fund is performing well, or you’d like advice on which fund is right for you, speak to a financial planner.
Review your fees
All super funds charge fees in return for managing your money. How much you pay in fees can have a big impact on your retirement balance, so it pays to shop around. Look for low fees combined with good returns. You can find out how much your current fund charges by checking your account statement or looking on their website.
Evaluate your investment options
Within each super fund, you’re given a choice of how your super is invested. Each investment option comes with its own level of risk and reward, so take the time now to review your settings and make sure they’re right for you. Your investment strategy should be tailored to your age, stage of life, super balance, values and appetite for risk. For advice on how to invest your super, contact your super fund or speak to a financial planner.
Check your insurance
Taking out insurance through your super fund can be a cost effective way of protecting yourself and your family against the unexpected. Most funds offer products such as life insurance, total and permanent disability (TPD) and income protection. The fees are taken out directly from your super account.
To do a health check on your cover, find out what you’re covered for and how much insurance you have. Will it be enough to support you and your family if you were to lose your income? Are there any waiting periods you need to serve before receiving the funds? And have you chosen a beneficiary to receive your payments, if you were to pass away? Speak to a financial planner for advice if you’re unsure.
Make extra contributions
Last, but not least, consider making extra contributions to your super. Every extra dollar you contribute now could be worth thousands by the time you retire. There are even some tax benefits to making extra super payments.
There are a couple of different ways you can contribute to your super:
- Salary sacrifice – This is where your employer pays an agreed amount from your pre-tax salary to your super fund. This can be a tax effective strategy, because the payments are taxed at 15 per cent (up to the concessional contributions cap) instead of your usual marginal tax rate. From 1 July 2021, the concessional contributions cap is rising to $27,500. Be aware that if you exceed the concessional contributions cap, you’ll need to pay extra tax on those contributions.
- After-tax (non-concessional) contributions – You can also make payments directly from your take-home salary to your super fund. These are called ‘non-concessional contributions’ because they’re not taxed in your super fund. From 1 July 2021, you can make up to $110,000 in non-concessional contributions each financial year.
The great thing about super is that it’s a long term investment. That means once you get it set up right, you don’t need to do a whole lot again for a while. Just review your settings each year when you receive your account statements, and whenever your life circumstances change.
Are you on track for a comfortable retirement? If you’d like advice on any aspect of retirement planning, including your superannuation, investments or insurance, speak to a Financial Planner.