Is it time for a Super Review?
Picture this... when you were 21 years old your well-meaning but financially inept uncle put $1,000 into an ordinary bank account for you with instructions to leave it there and “let the bank’s interest turn it into a fortune”. You followed his directions only to discover 30 years later the balance of your ‘fortune’ was a paltry $6,023! What went wrong? Well, to put it frankly, you didn’t give it any attention.
This is a classic mistake that many Australians make when it comes to their superannuation.
There has been a lot of talk about superannuation in the news lately. How long has it been since you reviewed your superannuation to see if it’s on track to meet your retirement needs, regardless of whether your retirement date is two years away, or twenty?
Here are some questions to ask yourself:
Do you know how your super is invested?
Have you ever made any changes to your super to suit your own circumstances? If you’ve never made a change, you may still be invested in your employer’s default option, which may not be appropriate to your current or future needs.
The following example explains when a default option should be reviewed...
Brian (64) and Ingrid (29) work for Some Such Corporation. Their employer pays their superannuation contributions into the company’s preferred fund, which has a default investment option with a higher allocation to cash and fixed interest assets. This suits Brian as he has built up a substantial nest egg, doesn’t like risk, and plans to retire soon. However, it does not suit Ingrid, who is unlikely to retire for a further 35 years and accepts short-term volatility to achieve higher returns in the long term.
Are you making personal contributions to super?
Making ‘salary sacrifice’ or non-concessional contributions to superannuation is one of the most effective ways to boost your retirement savings. You may also earn additional tax benefits or government co-contributions. On the other hand, if you are making regular contributions, are you sure that you’re staying within the set limits and won’t be penalised for contributing too much?
Who will receive your super when you die?
Have you nominated a beneficiary on your account, or want to make a change to your existing arrangement? Some binding nominations are valid for only three years. Is yours still current?
Does your super fund provide any insurance cover?
If it does, remember to check the level for which you are covered. You may find that your existing cover has become inadequate and it’s time for a review. Alternatively, if you have insurance outside super, you could look at cancelling that cover, allowing the money saved to be allocated for investment. But don’t make any hasty changes until you have sought personal advice.
Aside from your own circumstances shifting, superannuation rules change often, so it pays to review your super regularly. You don’t want to reach that long-awaited retirement date to find you don’t have as much as you had “hoped”. Give us a call if you would like to start setting goals and making a plan.
Assumptions for calculation:
$1000 invested over 30 years averaging 6% interest with no additional contributions. Not including fees and charges.