When you hit your 30s, your priorities may shift a little from what they were in your 20s. You may have got your foot on the property ladder and become focused on paying your mortgage. Maybe you are thinking about starting a family and preparing for all the expenses that come with the pitter-patter of little feet. These financial issues might take up most of your attention but that doesn’t mean you should neglect your super.
Here are some things the experts say you should be doing in your 30s to build your retirement nest egg.
Take a look at your fund
Director of Superannuation at HLB Mann Judd Sydney, Andrew Yee, recommends reviewing your current super funds, in particular their investment strategies and costs. “It’s important to assess whether it meets long-term savings and retirement goals, [since] it cannot be accessed for another 20 to 30 years,” he said.
This is something you should do every year. Take a look at how your fund has performed compared with similar funds over the long term. Also, consider whether the fees you’re paying are reasonable.
Think about consolidating
If you have had a number of employers during your career, you might have ended up with multiple super funds and multiple sets of fees – which would affect your long-term super savings, Aware Super Senior Manager – Advice Network, Andrew Donachie, explained.
“If you have multiple funds, it might be time to consider consolidating your super into one account. It will save on fees and help you keep tabs on your savings,” Mr Donachie said. “Everyone’s situation is different, so before you decide to consolidate, compare your options and consider any fees and loss of insurance from your other fund to make sure rolling over is right for you.”
Know your balance
It’s vital to know how much money you have in super. “It’s your money and it will be a critical asset later in life, so if you’re not already in the habit of keeping a watch on your balance, get into the habit now,” Mr Donachie suggested. This can help you work out whether you’re on track to achieve your goals or may need to do more to give your super balance a boost.
Check that you’re on track
The Super Balance Detective on ASFA’s Super Guru website shows you how much you should have in super now to reach the ASFA Comfortable Standard balance by age 67, based on your age. The results are as follows.
→ Related: How much super should I have at 30?
Understand where your money is invested
Time is on your side, so you might consider taking on more risk in your chosen fund, Mr Donachie said. “Young people often choose conservative investment options, despite the fact they have many working years ahead and can accommodate higher risk in their investment portfolios,” he told Canstar.
If you’re uncertain about the right approach for you, financial advice can help.
Consider salary sacrificing
“Salary sacrifice into super what you can afford to, to build it up and boost retirement savings, whilst also reducing the tax payable,” Mr Yee explained. “Remember the benefit of compounding – it is essentially interest on interest – so the earlier you put money into super, the longer it has to accrue compounding interest.”
Salary sacrificing involves asking your employer to contribute part of your wages or salary to your super before you get paid. The advantage is that the money goes into your fund taxed at 15%, which is probably much lower than your marginal tax rate. If you are topping up your super, stick to the caps or you pay a penalty. The limit for pre-tax contributions is $27,500 a year; keep in mind this includes your employer’s Super Guarantee contributions.
Take advantage of the government’s co-contribution
If you earn less than $56,112, you may be eligible for the government co-contribution of up to $500 when you make after-tax payments into your super. To get the maximum top-up of $500, you need to earn $41,112 or less and add $1,000 to your fund.
Don’t forget your super if you’re not working
Many women (and an increasing number of men) take time out of the workforce when they start a family but it’s important that you still think about your super so you don’t pay the price later. Think about adding extra money to super before you have children, to build a buffer. You might also consider getting your spouse to contribute for you while you take a career break. You could also make the most of the government co-contribution.
Review your insurance
Your fund will probably include some life insurance automatically but it’s important to work out for yourself whether it’s enough.
“Review personal insurances within and outside of super to determine if you have appropriate cover for your current stage of life and whether the insurance is more cost- and tax-effective within or outside the super fund,” Mr Yee suggested. “The key point with insurance is it’s not a set-and-forget strategy and instead needs to change over time to reflect your changing circumstances.” And don’t forget income protection cover.
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