What’s more, taking time every now and then to check in on your superannuation could end up making a significant difference to the size of your retirement nest egg. Here are five steps to check the health of your super, regardless of what stage you are at.
1. Consider consolidating
We’ve written about it before, but it bears repeating – consolidating multiple and lost superannuation accounts can be a straightforward way to put your super on a stronger path. More super in one place potentially means fewer fees, a larger return on the single balance (if rolled into the higher-performing fund), and you get to avoid the headache of keeping tabs on multiple super balances. Keep in mind although consolidation is beneficial for many consumers, it isn’t the right move for everyone, and it is worth doing your homework before deciding one way or the other.
2. Evaluate your investment options
Your investment decisions tend to be guided by your current circumstances and the amount of time you have before you want to cash out the investment in question. While some funds offer options specifically tailored for people of certain ages, some funds still require you to make the decision yourself.
You can read our guide to superannuation investment options here, but the short story is that any given investment portfolio option offered by a fund will likely fall into one of the following risk categories:
- Low-risk (sometimes also referred to as conservative);
- Moderate risk (sometimes also referred to as balanced);
- High-risk (sometimes also referred to as growth);
- Very high-risk (sometimes also referred to as high growth or aggressive).
We have an article which explains the various pros and cons of different risk profiles, but if you want the short version, it’s that:
- Conservative investment options are relatively safe but generally low return, and may be suited to older Australians who are relatively risk averse;
- Aggressive investment options have the potential to reap higher returns but can be more susceptible to market downturns. This risk profile may be suited to younger Australians who want higher returns and have plenty of time to ride out any market crashes.
While you probably won’t need to tweak your investment options every time you check in on your super, it may benefit you to consider your circumstances regularly and think about whether it may be worth adjusting how your super is invested.
3. Make sure you’re with the right fund for you
The difference between the right fund and the wrong fund can be thousands of dollars at the point you retire – so it’s something you want to get right. We have two handy guides you may find useful at this point: one for how to choose a super fund, and one for how to change funds once you’ve found what you think is the right fund for you.
You can also compare funds using our superannuation comparison tables to see if you can find the right fund for you. The table below displays some of the funds on our database but you can generate your own comparison if you want to view products which may be better suited to your personal circumstances and preferences.
4. Check how much of the contribution caps you’ve used
There are limits on how much you can contribute to your super account, both before and after tax. According to the ATO, exceeding these thresholds may result in having to pay extra tax, so it’s something you may wish to keep in mind.
The easiest way to avoid exceeding the contribution caps, if you do make personal contributions to your super, may be to simply keep an eye on how much you’ve contributed so far for the financial year. This should allow you to keep track of whether you’re coming close to hitting the cap, and subsequently give you time to restructure any salary sacrifice arrangements you may have or voluntary contributions from your savings you may be making, in order to avoid exceeding the contribution thresholds.
That being said, our article explaining the superannuation contribution limits does note any unused portion of the annual contribution cap for before-tax contributions rolls over and gets added to the next year’s cap – according to the ATO, you get up to five years of rollover for before-tax contributions. For after-tax contributions, on the other hand, the ATO advises that, depending on your age, you may be able to automatically ‘bring forward’ up to two additional years of caps on after-tax contributions into a single year, to allow you to contribute more money straight away.
5. Learn more about salary sacrificing
We mentioned salary sacrificing before briefly, but it bears expanding upon. Salary sacrificing into superannuation can, for some people, be an easy way to kill two birds with one stone – more money going into their super can mean more long-term interest and a larger retirement benefit and depending on your personal circumstances, salary sacrificing could potentially result in a reduction of your tax burden according to the ATO.
Additionally, another prudent move you can take to try to ensure your retirement benefit is adequate for your needs is comparing funds to check your super balance is with the right fund for your circumstances. You can compare super funds to see if you can find the right one for you with Canstar.