Let’s talk superannuation. I’ll spare you a typed rendition of ABBA’s Super Trouper, but BIG points from me if you also like to howl that banger after a couple of vinos.
Superannuation is one of those things that are easy for us millennials to ignore. When we’re young, retirement feels like forever away, so tinkering around with our retirement savings that we won’t be allowed to touch for 30-40 years feels a bit deflating. But, getting on top of your super at an early age can pay huge dividends later in life. Literally. It can literally pay you more later in life!
Here are 7 things you can do right now to power up your superfund.
1. Consolidate your super funds
If you’ve still got multiple super funds scattered across your memories of burger-flipping jobs of yesteryear, it’s time to consolidate your super accounts. You can do this in minutes, simply by logging into your MyGov account and following the steps within the superannuation system. Consolidating your accounts into just one fund is the very first step on your journey to bossing your superannuation.
2. Make sure your employer super payments are actually going into your fund
Under Australia’s super guarantee scheme (ahem, free money…which to a British ex pat is still quite mind blowing), your employer is required to pay at least 9.5 per cent of your salary into your super fund. You’ll see these payments on your payslip, but it pays to log into your fund regularly to check that these payments are actually being made. Your employer may pay them into your fund weekly, fortnightly, monthly or quarterly. All are permitted, providing they meet the required deadlines.
3. Look into making extra super contributions
I know, I know, making payments towards a life that’s so far away feels kinda crap, but even just an extra $10 a week can make a huge difference. Plus, if you’re looking for a sneaky little bit of instant gratification, making extra super contributions may reduce your tax bill. Australians are allowed to make voluntary super contributions up to $25,000 per year. You can either make contributions via a salary sacrifice arrangement, where your employer contributes a nominated amount of your pre tax income for you. This reduces your tax payments because you only pay tax on what’s left after you’ve made that extra contribution. Alternatively, you can make personal super contributions with your after-tax income (i.e. your take home pay), and claim a tax deduction for that amount on your next tax return. You need to notify your super fund before you make those personal contributions though.
Moneysmart has a neat little calculator that shows you how best to optimise your super balance via additional contributions.
4. Get across your insurances
Not only does your super fund help grow your savings for your future retirement, you can also hold insurances as part of your fund. Things like life insurance, total permanent disability insurance, and even income protection policies can be taken out using the money in your super fund.
Taking out these insurances when you’re young and healthy will make getting a decent policy far cheaper. If you become sick or injured with a long term condition and you’ve not yet taken out insurances, it can be difficult and very expensive to get a policy.
This interview with a financial advisor about superannuation insurances will explain more.
5. Look at what you’re invested in
Superannuation funds are designed to be fairly hands-off – that is, you don’t need to be tinkering with your investments every day for your fund to grow. Your super is invested in a long term strategy, across things like cash, bonds, shares, gold , property, private equity. Make it your mission to log into your super account and have a look at how your fund is invested. You might even want to make some changes, or seek financial advice for specific strategies from a qualified professional.
6. See how much you’d need for a comfortable retirement
When you reach retirement age, you may be entitled to the age pension, and you’ll also be able to access your super fund. While this sounds like an easy route to a comfortable retirement, lots of people (particularly women) are retiring with much less superannuation than they need. It’s worth thinking about what type of lifestyle you would like to have in retirement, and using a super calculator to work out how much you’d have in your fund based on your likely income trajectory. Doing so can help you identify how much extra you want to sacrifice now, to benefit future you.
I personally want to be a seriously trendy retiree, so I’m going to need to ramp up my contributions if I want to be strutting around the south of France wearing white loafers.
7. Check the performance of your fund
Another easily-ignorable aspect of superannuation – the balance. Even though you won’t be accessing your fund until a few decades into the future, it’s still worth checking in on your fund’s performance every now and again. Particularly as we enter a recession in Australia, watching how your fund balance rises and falls over time teaches you a lot about the economy and the market as a whole.