Money Bite-Size Read:
- Retirement planning is one of the things we all put off until later.
- However, small actions you take now to manage your super can add up.
- Here’s how you can sort out your Super in just 15 minutes to put yourself in a better financial position.
The Money Bites Take:
While we love to put off retirement decisions, taking small actions to sort out your super now will help future you comfortably retire into cashmere, not acrylic.
If you live in Australia, chances are that you have put one thing off until later.
That one thing is superannuation. Superannuation, also known as super, is how we plan for retirement in Australia. We procrastinate on tasks like this because if it feels difficult or overwhelming, we take the easy option and avoid doing the task.
However, the decisions you make now add up.
That includes the decision to do nothing. There are issues with super but it’s the system we currently have and need work within to plan our retirement. Many millennials are likely to experience retirement stress despite young people having a great opportunity of more time in the market to improve their retirement options.
For the next 15 minutes, I want you to associate the word super with superheroes.
That’s because, like superheroes, super has the power to catch you comfortably in retirement and avoid the dreaded financial pitfalls. Super is the fund that you can rely on when you reach the official retirement age or if you need to access your super early.
You may put off the decision to sort out our super because it feels too big to tackle right now. But in as little as 15 minutes, you can take small actions that will add up later.
Here’s how you can sort out your super in 15 minutes:
1. Find your super
When you start a paid job and qualify for super, your employer typically gives you a superannuation form to choose your super fund. If you already have a super account, you would fill in the relevant details and ask your employer to pay your super towards this account.
However, this takes more time to fill in, and many of us just tick the default option. That means your super is paid to a fund that your employer chooses for you. The problem is that you may have many jobs in your lifetime and lose track of all these super accounts. Nevertheless, you worked hard for that money, and it’s worth looking for the super that you earned, even if you’re not sure where it is.
Take action: The Australian Tax Office (ATO) can help you search for lost super, including by linking your myGov account to the ATO or contacting them directly. For example, if you can’t remember the fund you signed up for when you had your first job, the ATO will likely be able to help you find this by using your tax file number.
2. Identify the best super fund
If you don’t want to stick with your employer’s default super fund, you need to pick a super fund of your own. Unfortunately, this can be where we get stuck, as many of us procrastinate and stick with the default fund rather than thinking about different options.
If you’re feeling overwhelmed, you are not alone. There are loads of accounts to choose from, and you may want to go with the same super fund that a friend has because you’re familiar with it. Instead, look at all the funds that are out there to find the right one for you. A super fund is an investment, so it’s worth considering your risk profile and the amount of time you have in the market when choosing between growth or conservative fund investment options.
Take action: Look at the fees charged over time and the returns on average of each fund. To support this research, you can look at the identified best super funds that are ranked each year, noting that past performance is no predictor of how a fund will perform in the future. Checking a comparison website can also help you get started with this research.
3. Consolidate your super
Many of us have a collection of different super accounts, particularly if you ticket the default fund option at a series of different jobs. However, this is not the appealing kind of collection like an assortment of posh handbags or trainers.
A collection of super funds come with fees attached to every fund, which add up over time. If you have multiple super accounts, all being charged duplicate fees, these fees act like piranhas, all taking chunks out of your money. If you have a favoured super account and don’t want your other super funds, it’s worth taking the time to consolidate your super.
Take action: Most super accounts have a form that enables you to consolidate all your existing accounts. This means it will close the other super accounts and pool the balance into one account.
We want to see future you comfortably retire into cashmere, not acrylic.
The decisions you make to sort out your super now all add up later. Look at the time you have ahead of you before you will need to access your retirement fund and take 15 minutes now to put yourself in a better financial position.