It’s simple to fall for some myths about your Super unless you do some clear thinking about who is in charge. Virtually all Australian employees now have a superannuation account, many have several, or even have some they aren’t aware of. Most of us aim to utilise this money to fund our retirement, but unless you take care of your Super then you are in danger of losing a portion of your money along the way.
The key to any good investment is knowledge, so here are some myths about superannuation that we have busted for you.
Myth 1: I can leave my Super for someone else to manage completely
It is possible go through your working life letting your Super run on auto-pilot, however you might be in for an unpleasant surprise if you do not watch on your Super closely, or at least occassionally. Make sure your employer is paying the right amount, and that if your employer goes broke your Super is still readily available.
If you change jobs you may want to consider if you wish to ‘roll over’ the money into another fund. If you change jobs often, this is particularly important. You can discover that you have fairly small amounts scattered over several funds, and in each you will be paying an account management fee prior to you making any distribution or interest. In the long term inflation will eat away at the value of your principle, even though the dollar amount stays the same. Many Super service providers offer a free service to consolidate your Super for you. Make the most of them.
Myth 2: Super does not improve your retirement outcomes
There’s been an increasing number of Aussies aged 65-69 depending on Super as their main income in retirement. As the reliance on Super has increased – with Super delivering more self-funded retirees and higher retirement incomes – there has actually been a decrease in the proportion of people counting on the Age Pension.
And retirement outcomes are improving. Over the past couple of years, the average Super balance of those primarily depending on Super rose from $407,000 to $470,000, according to the Australian Bureau of Statistics’ Survey of Income and Housing. So, in short, Super is delivering and helping to improve your retirement outcomes.
Myth 3: Super fund is not my money till I retire
This is simply not true! It’s your money, much like the the money in your salary. Super funds are providing a service of managing your money up until you are eligible for accessing it, that is, when you retire. You have control of it. Therefore, if you are not satisfied with the service from your current Super fund, you should raise it with your service provider. If they can’t fix your problem or are not doing a good job managing your funds, then you should look elsewhere.
Myth 4: I don't need to bother with it until I am at least over 50
Not really. Australians are enjoying longer lives and much better health. You will require more money if you want to sustain your lifestyle in retirement. You will most likely require to top up your Super to achieve financial independence throughout your working years. The earlier you start the better.
The Australian Government is offering help to lower and middle income earners to top up their Super through the Superannuation Co-contribution Scheme (you can read more here). If you or your partner are eligible, make sure you don’t miss out and apply for it.
Myth 5: Investing outside of Super offers better returns
Statistically, over 10 years, Super returns tend to surpass returns beyond Super. While Super is not an asset class in itself, the 2017 Russell Investments/ASX Long-term Investing Report shows how a diversified, multi-asset approach can secure investors from one-year changes to returns.
Super also offers opportunities to diversify beyond shares and bonds and into other asset classes such as property. No matter whether an individual is at the top or the lowest marginal tax rate, returns through Super are similar or better in every category.This is because of a variety of features that make Super the very best retirement savings option for almost everybody:
Concessional tax treatment of Super
Compared to the same investments being directly held by individuals, Super leads to more savings being invested, and greater after-tax financial investment returns from all kinds of investment.
Compulsory contributions and default investment options
Without compulsory Super contributions, most of us will find it hard to actually save for the future. By ensuring regular contributions by employers, the Government actually helps people in putting money into their retirement savings.
Well-diversified investment options
Individuals in APRA-regulated funds likewise benefit from access to well-diversified investment portfolios consisting of asset classes that can be difficult to access otherwise, and with fees that are normally lower than those provided straight to the public in other finanical products.
Our superannuation is actually our money. To look after your Super you really need to learn about your rights and options. We all hope to utilise this money to fund our retirement and continue the lifestyle we desire, but unless you look after your Super then you risk losing some of your money along the way and not maximising your returns.