Your employer is required to contribute to your superannuation fund, but you don’t have to – and this is the mistake that many Australians make. If you’re not setting aside additional funds for your future retirement, you’re setting yourself up for a big hurt when you get older. You see, the government can’t provide enough money for you to retire on. Your employer probably contributes just 9 per cent of your salary, and that’s nowhere near what you’ll need. Here’s how to boost your super so you don’t end up in the poor house.
Stay Consistent A lot of “magic” behind retirement planning isn’t magic at all. There’s no special investment, for example, that will make your need for saving go away. Consistency is the secret, if there is a secret. Making regular contributions over a very long period of time ensures that you have a good base to work from. Any investment gains you receive are a nice addition to your basic savings, but you shouldn’t count on a return higher than what fixed interest rates pay. Why? Because variable rates are, well, variable. They can certainly boost your savings, but they can also take away from it if the market moves against you. The only way to combat the inherent variability of the stock market is consistent saving. Have you worked more than one job? Odds are, you have more than one super laying around. Unfortunately, it also means that you’re paying multiple fees for each super account you have with an employer. Roll over any past superannuation plans into one account. You’ll potentially save money on fees, and you can better manage one account versus three, four, or more. If you roll your other super accounts into one, you can also choose a financial firm that offers low-cost investments, thereby saving yourself a lot of money in fees over the long-term and simplifying the distribution process when it’s time to draw an income.
Sell Your Junk
Everyone has a little junk hanging around. Maybe you have an off-road utility vehicle you haven’t used in a few years. Why not sell it? That hunting equipment that’s been sitting in the garage for the last couple of years? Sell it. Old furniture, gadgets that are collecting dust, even books and clothing you no longer use can be sold. Have a yard sale. Take the proceeds and put them into your super.
Claim Unclaimed Funds
Did you know that one in three Australians have an unclaimed superannuation account? That’s incredible. You can use services like the ATO’s SuperSeeker page online to find out if you have any unclaimed money sitting in an account somewhere. Even if it’s not a large amount, every bit helps. Imagine finding $2,000 in an abandoned super. Would you take it? Of course you would.
Choose A New Fund
There are many Australians that are eligible to participate in the “Choice of Fund” initiative that started back in 2005, yet many haven’t done anything about it. Basically, you can choose a new fund to invest your super in. Why would you do this? Because some of the new funds are lower-cost, and will thus provide you with a higher potential net return. One of the critical factors that determines the long-term performance of your savings is the cost of the fund itself. For example, if your super is earning roughly 6 per cent annually, and you’re being charged a 2 per cent fee, it’s like earning 4 per cent. Imagine if your new fund only charged 1 per cent. You just halved your fees and added 50 per cent to your total return. Nice huh? It’s the little things like this that will add up to big savings at retirement. Get on it, do your own research, and stop taking advice from your mate John.
Helen Akin is an economics and finance professor. An avid blogger, she enjoys sharing her insights on various blog sites. To learn more about income protection and financial planning, ask the helpful folks at Wealth Smart.