We all know planning for retirement is important. But with work, family and day-to-day life, looking after our super is simply one of those tasks that seems to fall to the bottom of the to-do list. It doesn’t help that superannuation is often perceived as a complex financial problem, which we feel unqualified for, or lacking in the time it would take to solve.
Adding to the pressure is the not-so-helpful media reports that surround superannuation. If we’re not hearing about billions being wiped off the share market (affecting superannuation balances), it’s retirement savings gaps for women, or reports of more women living in poverty during retirement. What’s more, it can be hard to determine what is marketing spiel, and what is actually good advice from providers.
As we are in the start of a new financial year, it’s as good a time as ever to begin looking at your superannuation. Here are some handy hints to get you started and feeling confident.
Take advantage of ‘intra-fund’ advice
There is a perception that financial advice is costly, time consuming and only for individuals who have substantial savings. However, most funds offer advice either as part of the fees you are already paying or for a small additional dollar amount. This advice should review your retirement adequacy, and will advise on what action you can take to improve it. While it can be daunting to take the first step, knowing what the problem is and having a plan to fix it is a much better option than the fear of the unknown.
There are only three main levers to improve your retirement adequacy – increase your contributions, retire at a later age or change the risk profile of your investments. Intra-fund advice services are designed to help guide you on which actions to take.
Contribute extra and contribute early
There is power in compound interest, particularly in superannuation, which is one of longest-term investments you will have. One of the best financial decisions I made was on the day I started work – nominating for an extra 2% of my salary to be contributed to my company’s superannuation fund. By the same token, the later you leave it, the more you need to contribute. What’s more, the more career breaks you have or are planning to have will also influence your additional contributions. Why not elect to contribute your annual pay rise into your superannuation account this financial year to give your retirement savings a helping hand?
The majority of us are ‘do it for me’ individuals
We just need to be assured that we have the right providers to help us and that we have an appropriate base to build on. You may choose to leave your investment or insurance choices to the professionals, who run your fund. Just be sure to actively decide that the default option is appropriate for your circumstances.
Choice of fund
Choice of fund is not as important as the above three items, except in certain circumstances. These days with the introduction of MySuper, most of the corporate default funds (the fund your employer has selected for employees who do not elect choice) have quite similar fees and features. However, you may need to consider your options in the following circumstances:
- if you are a member of multiple funds where flat fees apply, it will cost you more
- if you have assets in a legacy corporate fund or in a retained section after leaving employment, you could be paying high individual retail rates or your fees may still have hidden financial adviser commissions built in.
Superannuation doesn’t need to be a no-go zone. Actively taking the first step in managing your super may lead you on a path to a much more comfortable retirement. Your future self will thank you for it!
Start a conversation with us
Aon Hewitt has services to assist in planning for retirement. For further information, get in touch with us today.