It’s a tricky one to answer as it would be possible to write a book on the topic. Very, very, very, very sadly, superannuation isn’t high on the list of importance for some Gen Y. It should be, because small decisions that you make now can have a large cumulative effect.
To my mind, there are three main ways that financial disaster could hit your super fund: first you could lose track of it altogether, second you could decide it’s not worth building it up, and third you could fail to take an interest in what type and amount of fees you’re paying.
Each of those actions could cost you tens of thousands of dollars in reduced retirement money. Definitely a disaster. Here’s how to help prevent it.
Keep track of it
A new job, an old address or a name change: it’s easy to lose track of superannuation. And according to the Australian Taxation Office (ATO) there’s currently $14 billion in lost super, waiting to be claimed. It includes $6 billion in accounts with incorrect addresses and $8 billion in accounts that have not received a contribution for five years or more. To check if some of it’s yours, go to the ATO website.
Build it up
Adding some extra money to your super fund while you’re young can make a big difference. As an example, an extra $200 per month added to your super fund between the ages of 25 and 30 could potentially boost your nest egg by around $168,000 at retirement (based on a 7% net return). If you don’t start that extra contribution until you’re aged 35, you’d need to contribute almost $440 per month for five years to get the same result.
Take an interest
If you don’t want to add extra, then how about paying out less? The fees charged on super fund vary significantly; CANSTAR research found that that just a 0.25 percent difference in annual fees can make a $64,000 difference to your super fund balance over 30 years. That’s money for jam! Similarly, making an active choice as to what asset classes your retirement savings are invested in (and of course the quality of those investments) can potentially improve the annual and long-term return on your fund.
Compare Super Funds on Canstar’s database
If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.
Still don’t think it’s worth your time? A recent ASFA report calculated that those with a super balance of $38,000 and earning approximately $70,000 a year, who work for another 32 years on the same salary level (adjusted for inflation) could expect a super balance of around $440,000 at retirement. How long would that sustain you, do you think? Probably not as long as you hope to live…