No one likes to think of getting older, but in the case of your super, it pays to plan things out, ensuring you get the best super you can for your retirement.
At one point in time in the future, you’re going to retire. It’ll happen, and hopefully you’ll be prepared for it, ready to enjoy some years without having to make your way to a job for some much needed income.
That’s where superannuation comes in, because a super fund grows in the background and gives you a nest egg to retire on. However, not every super fund is created equal, and there are things we can do to help maximise the potential of our superannuation accounts.
To start making the most out of your super, you need to first look at your super accounts, understanding why you have it and the goal you need for it.
What is the point of having super
Your superannuation is a portion of your money set aside not so much for a rainy day, but rather when you’re older. You don’t want to think about it – trust us, we’re the same – but that day is coming, and the older you are, the faster it will arrive.
Superannuation is money set aside for retirement, for when you’re too old to work and just want to enjoy yourself. It grows based on the amount you accumulate and interest you earn, and while employers are required to add to it as part of your salary, you can add your own money to help it along.
Eventually when you hit a “preservation age” and are within a condition of release, you can access your superannuation and use it. Most conditions associated with accessing superannuation are based on age and employment status, as superannuation is typically paid out to people who are leaving the workforce.
Set a goal
You probably won’t be thinking of leaving the workforce for quite some time, and that’s fine, but you should know how much money you want to leave with. Really, it’s about how comfortable you think you’ll need to be.
Superannuation helps ensure that when you’re older, you’ll have money if you decide to stop working in retirement, or even if you decide to continue (at age 65 and over, you can access your super even if you haven’t retired).
Money is important, and so is working out how much you’ll need, though this can be impossible to work out exactly.
However, what you can do is calculate what you think you could live on comfortably, and set a goal accordingly.
ASIC’s Superannuation Calculator is one tool that can help, providing a glimpse into how much money your current pay-packet and super balance will amount to, and giving you a firm understanding of how much money you’d have when you eventually cash out.
After a few simple calculations by the superannuation calculator, you should have an idea of what you’ll get if you continue at your current rate, and that might prompt you to set a goal and change some of what you see. As such, you can compare what this result shows against funds that offer more growth and with potentially lower fees, while finding out what a result would look like if you contributed to your fund outside of your day job.
Your contributions are an important factor, and can help improve the amount in your super fund significantly, growing the balance with your own additions. It might seem like that money is just preventing you from buying something new and fancy now, but imagine what it could do later on if it grows substantially into a more impressive retirement fund.
Compare super funds
Once you have a goal in mind and have decided that it’s possible to get to that goal, it’s time to really put your money where you mouth is and compare funds.
Superannuation funds aren’t going to be the same across various companies, and even they probably won’t be the same across various products in the same company. Some super funds may end up giving you a better result than others, and so it’s worth looking into what super funds typically return.
Much like a term investment fund, the more money you have to play with and the better the performance of the fund, the better the result, so it’s worth checking out the options to see how your money can work for you.
It’s not just a matter of performance, either. Super funds will generally take fees out of your account for the cost of managing it, including membership fees, administration fees, adviser fees, performance fees, insurance fees, and various other fees that a super fund can charge to your fund. Unsurprisingly, these fees can add up, so it’s worth comparing funds to see if your super is getting the best deal possible.
Comparing super funds at least gives some of the power back to you, putting your retirement fund in your hands and affording you more control to what you can get out of your finances.