For most of us, superannuation is the second most valuable asset we’ll ever own, behind only our family home. Super is designed to be the cornerstone of how we finance our retirement, a period that on average, makes up almost 20 years or around a quarter of our lives.
Despite superannuation’s significance, the majority of us know very little about our own super. Ask yourself these questions:
Do you know the projected balance of your super at retirement?
Do you even know the balance now?
Do you know the risk profile of its investments?
Does your super include life insurance?
In the Australian Financial Attitudes and Behaviour Tracker published last year, 76% of respondents reported having a superannuation fund1. More importantly, of those people, 23% reported having no idea of the value or composition of their fund and a further 43% had only a rough idea.
If you can answer any of the above questions confidently, you’re well ahead of the game but it’s likely you could still benefit from being more in the know when it comes to your super. Here are just 3 points to start considering:
1. Should you be making additional contributions?
The Association of Superannuation Funds of Australia (ASFA) suggest that you should be saving around 12-15% of your salary over a 30-year period as a minimum savings target2. To achieve this, making additional super contributions could be critical.
Like many financial goals, it can make a huge difference if we can actually see the impact of the sacrifices we’re making which is why many superannuation products, such as the Commonwealth Bank’s Essential Super, allow users to view super balances and transactions alongside their bank accounts using their mobile app.
2. Do you know what your superannuation is being invested in?
It’s easy to think of super as nothing more than a big, long-term savings account that we crack open when we retire. However, it’s far more than that. The power of superannuation lies in the fact that it’s made up of a combination of our contributions, interest earned and for most people a considerable portion is invested in an array of shares and funds at the discretion of their superannuation fund provider.
Do you know what your superannuation is invested in? Most super funds allow a degree of choice to members, allowing them to select risk-based options such as ‘balanced’ or ‘growth’, or potentially more tailored options like ‘Australian shares’ or ‘international shares’. However, sometimes the issue with this lies in the fine print… Often funds that aim for reasonable rates of return will have investments in ASX listed companies. If you’re still wondering what the issue is here, then consider this: over half of Australia’s superannuation funds still invest in companies associated with tobacco3.
An investment strategy is a deeply personal and individual matter, but it makes sense that if you feel strongly about an issue or give credence to a certain social or environmental policy, you would want your superannuation to align with your beliefs. This is why, when it comes to your super, being in the know is important.
Some superannuation funds are specifically tailored to exclude certain investments and for example will not invest in companies connected to coal, fossil fuels, oil, weapons, logging, gambling or companies implicated in human rights abuses4.
3. What are the associated costs of your superannuation?
While administration fees, withdrawal fees and insurance premiums vary, have you taken the time to consider how much these additional costs could be impacting your superannuation? It’s worth taking the time to compare these additional costs to ensure your chosen fund suits your needs and lifestyle after retirement.
The good news is it’s not too late to start taking an active role in managing your super. While we all lead busy lives, taking the time to be in the know when it comes to your superannuation can have extensive benefits and with these 3 points, you’ll be well on your way.
Sources:
[1] http://www.financialliteracy.gov.au/media/560717/afab-tracker_wave-5_key-findings_final.pdf
[2] In Focus Money Management, “Focus on Superannuation”
