According to SuperRatings, just $1 invested when the super mandatory started 30 years ago is now worth $7.67, based on the median “balanced” fund.
Remember that all super fund performance figures are net of fees. Make sure, if you’re paying more than the 1.1% SuperRatings names as a “typical fee”, that the fund you’ve chosen is performing well enough to justify the extra cost.
Get the best combination of investments
Do as I do and look away from the spectacle of your super fund balance collapsing – provided your fund’s investment option is the right one. It should never be determined by what’s happening in the stock market, and always by what’s happening with you.
Of the types of funds I listed above, “growth” funds hold between 77% and 90% equities and are therefore quite exposed to stock market volatility. “Balanced funds” hold a more moderate percentage of 60-76% of the shares.
There are also more conservative options, especially for super members who are approaching retirement and cannot afford to risk their large stack of cash. These include “stable capital” funds, 20 to 40% of which are invested in equities.
Both your age and your level of risk aversion should determine your appropriate investment option.
With plenty of time and the temperament to ride any rally in the equity market, I’m happy with my mix of aggressive investment options that reflect equity markets (via index tracking), plus a core ‘balanced in my super fund.
Collect what is owed
You should have had a 0.5% “pay rise”, with the super paid mandatory by your employer going from 10% to 10.5% from July 1.
Fortunately, the rule that required people to earn $450 a month from an employer before qualifying for the super has been removed. This is especially good for parents who are gradually re-entering the workforce, perhaps with several casual jobs, after raising children.
On the cost of children, in super terms, this is considerable. The Association of Superannuation Funds of Australia says men retire with an average of 26% more in their super funds than women – $154,453 compared to $122,848.
However, the bias of our super system is not only the time without paid work to have a family, but also the fact that it is salary-based, while there is a persistent gender pay gap – still at 14 percent today.
Finder’s analysis of the numbers suggests that women can make up for this shortfall by contributing an additional $236 to their super fund each month (based on a male salary of $84,521 and a female of $60,679 ). It is important. Remember that women often live about four years longer than men.
My New Year’s Resolution
Remember that you have a concessional annual super contribution cap of $27,500, including employer contributions, amounts foregone from your salary, and any additional contributions you may have made and for which you claim a tax deduction.
However, it is also possible to boost your super by mopping up several years of unused contribution limits.
Claim the gifts
There are two can’t-miss annual giveaways, if eligible.
The first is the spousal contribution.
If a spouse with a higher income contributes $3,000 after tax to the super fund of a spouse who earns less than $40,000 a year, he receives a tax compensation of up to $540. It’s worth it on the super and tax fronts.
The second is a super “free” opportunity.
Provided someone earns – less than $57,016 this tax year – and puts $1,000 after tax into their super fund, the government will pay up to $500 more. It’s called super co-contribution, and it would only cost you about $19 a week…for an instant 50% return.
Remember, with stocks now on sale, bargains abound. So any additional contributions you can make to your super will brighten your future.
- The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. They should always seek professional advice that takes their personal circumstances into account before making financial decisions.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.