One of the hardest things for us to get our head around when we’re young and just beginning our careers is that we need to think about superannuation and retirement. Super just seems boring, and retirement is so far away that it’s hard to even imagine it.
But, like anything, the longer we leave it, the harder it will be to catch up. So, what can we do now to ensure we’re building the foundations for a healthy retirement?
I’ve put together a few things that will at least get you on track, and mean that when the time comes to pick it up again later, you’ll have things in order and ready to go.
- Roll over your existing funds
Most of the young professionals who come to see us have any number of superannuation funds (the most I’ve seen is 12!) that they’ve accumulated since their first part-time job. While most of these funds wouldn’t be charging very high fees, the fact of the matter is that while you’re spreading your superannuation money-love across the finance industry, fees will be slowly eroding away your accounts!
As a starting point, pick one of the funds that you’re currently invested in (or a new one if you are inclined to do the research) and give them a call. Ask them to help you rollover all of your other accounts, they should be more than happy to help, however if you run into any roadblocks, you can use this standard ATO Rollover Form.
It’s like spring cleaning – you’ll feel so much better for having it all in one place, and you may even find that you have more invested than you originally thought.
- Choose your investments
You may have noticed that I’m using the term invested. That’s because your superannuation funds are being invested, many of us think that we’re investing in “super” but we’re actually investing in regular old investment markets – the same stuff that’s available to us outside of superannuation (shares, managed funds, property funds, cash and term deposits). This is a really important realisation if you’re going to start taking your retirement savings seriously.
The money that is accumulating within your super fund is your money, and care should be taken as to what it is being invested in. That’s right: you should take the time to make a choice as to how you would like this part of your wealth to be invested. Don’t just let it land in the default option and sit there!
Now that you’ve chosen a fund and rolled over all of your money, have a look through the investment menu of the fund and decide how you would like to invest your money. You can of course consult the services of a professional investment adviser if you feel uncomfortable with this. Many super funds even have investment advisers you can talk to. But, if you are comfortable having a read and choosing a few options yourself, then go for it. The most important thing is that you know what you’re invested in and why.
A simple test would be looking at your super balance and asking yourself, ‘If I had a cheque for that amount of money in my hand right now, and I had to invest it outside of superannuation, what would I do with it?’
- Start small with salary sacrifice
Cash is king, and none of us want to reduce our salary below what it currently is, however just a little bit now, on a regular basis, over a long period of time, will make a huge difference. As an idea, for someone who is 30 and decides to salary sacrifice just $20 a week into super until they’re 65, they’ll potentially add more than $70,000 to their final balance. Make it $100 a week and you’ll end up with around $360,000 more in super at age 65! A little now really makes a large difference later on.
The best thing about salary sacrificing into superannuation is that you get to use pre-tax dollars. That means the money gets contributed before you’ve paid tax on it, so you’ll save anywhere from 4% to 30% in tax that would have otherwise been payable.
Your payroll department should be able to arrange this for you, and if in doubt, give your super fund (or financial adviser) a call and ask for some help in establishing this.
Like anything, little steps in the right direction now pay off later in life.
Build it slowly.
Disclaimer: Please note this article is of a general nature and should be used for informational and educational interest purposes only. Please seek professional advice before making any decisions in relation to your own personal circumstances.