Smart super strategies for your 40s

As you reach the halfway mark of your career, start thinking about the lifestyle you want later on and how much super you’ll need to maintain it.

Even though retirement might feel that little bit closer when your age begins with a four, people in their 40s tend to be focused on getting rid of their mortgage, paying for their kids’ education and possibly throwing renovations or an investment property into the mix. Your super should also be at the forefront of your mind.

What strategies should you be using in your 40s to boost your super? Here’s a range of tips from the experts to help you along the way.

Start planning your retirement

“It’s important to start thinking about your retirement plans in a broad sense,” Apt Wealth Partners Director and Senior Financial Adviser, Andrew Dunbar, said.

“Most critically, you need to understand the lifestyle you would like and how much money you will need to finance it [to be able] to ensure your superannuation is on track.”

This means thinking about things like when you want to stop working, whether you’ll own your home and whether you’re hoping to travel overseas regularly.

→ Related: How much super do you need to retire on $50,000, $70,000, $90,000 or $100,000 a year?

Top up your super

“Although this is the period of your life when you will have your highest expenses, it is important not to neglect your retirement savings,” HESTA financial planner Joel​ Brennan said.

“Using a pay rise or a promotion as an opportunity to increase your contributions to super is a great way to save without having to take home less than what you are used to. Another strategy is to use your yearly tax return as an opportunity to make a lump-sum contribution to super that you may be able to claim as a tax deduction as well.”

Mr Dunbar agreed that adding money to your super is important.

“It’s a good time to evaluate and decide how and whether you should use any catch-up provisions available to you, such as [the ability to carry forward] concessional contributions, where you can roll over unused amounts under contribution caps to make bigger contributions without penalty,” he said.

“If one partner is a lower income earner and/or has taken a career break, spousal contributions can be a great way to boost your combined super while potentially being a tax-effective strategy for the primary earner.”

Think about super vs mortgage

One question you may be asking yourself if you have a mortgage is whether you should put your extra money towards that or your super.

“This is often a personal preference, trading off a paid-off home for a better retirement, but consider doing a little of both,” Nucleus Wealth Head of Advice Timothy Fuller said.

“If you have a young mortgage, favouring your repayments to reduce the principal, then seeking to increase super contributions later on, can be a good approach. As your income (and marginal tax rate) increases, lifting your concessional contributions (salary sacrifice) can also mean a big tax saving, while boosting your super balance.”

Look for lost super

This is a tip for any age.

“If you’ve had a number of jobs, and your account isn’t active, your fund may transfer your funds to the [ATO] as unclaimed super for safekeeping. In 2020, the tax office reported $13.8 billion in unclaimed super,” explained director and financial planner at Viva Financial Planning, Elizabeth Hatton.

The good news is that it’s easy – and free – to check if some of that lost super belongs to you.

Consider consolidating

If you have more than one super fund, think about consolidating them.

“Having multiple super funds means multiple fees and multiple insurance premiums. Over time, this will eat away at your balances,” Mr Brennan said.

“Choose a good-performing fund and make sure that you are still invested in options that are suitable for longer-term growth. You are, sadly, only halfway through your working life and you have plenty of time to ride out any short-term market volatility.”

Before consolidating, though, it’s important to consider any insurance you have in the funds you’re thinking about closing.

Check the fees you’re paying

Even if you have only one fund, make sure the fees aren’t too high.

“There can be a considerable difference in fees for essentially the same product,” Ms Hatton warned.

“If you’re paying any additional or unnecessary fees, this erodes your super balance and may affect the amount you are relying on to assist with funding your retirement.”

Review your fund

“With a potential 20 to 30 years of work ahead of you, and probably being in the busiest part of your life, superannuation can often take a backseat,” Mr Fuller pointed out.

“Making sure that you can confidently say your superannuation situation has been reviewed and you are happy with the investment approach is crucial before getting drawn back into the bustle of life.”

Consider how your fund has performed over the long term, what fees it charges and whether the investment option is right for you.

→ Related: Top performing super funds on Canstar’s database

Take an active role in your investments

“While it may be a little early to pull back to a defensive strategy, it is time to make sure you are in the driver’s seat,” Mr Dunbar said.

“Ensure you understand where and how your super is invested. Super isn’t ‘set and forget’. This is your future income stream, and you should take an active role in protecting and growing it.”

Consider how you feel about risk and when you are planning to retire before making decisions about how you want your money invested. You may want to “get some form of advice around the appropriateness of the investments for your life stage and avoid the pang of guilt later on,” Mr Fuller said.

Check that you’re on track

The Super Balance Detective on the Association of Superannuation Funds of Australia’s Super Guru website shows how much you should have in super now to reach the ASFA Comfortable Standard balance by age 67, based on your age. See below.

40: $143,000

41: $154,000

42: $164,000

43: $174,000

44: $184,000

45: $195,000

46: $207,000

47: $219,000

48: $231,000

49: $244,000

Arrange a binding nomination

Your superannuation is not treated the same way as the rest of your estate when you die. The fund’s trustees can decide who gets your super, so it’s important to set up a binding nomination.

There are rules about whom you can list as a beneficiary, though, and the nomination has to be updated every three years to remain valid.

Look at your insurance cover

When was the last time you looked at your insurance cover?

“There are a number of tools available to help work out how much you should have, or you can always speak to a qualified financial adviser,” Mr Fuller said.

“Often, in your 40s, you have accumulated some debt and dependants. Both of these are good reasons to be holding the correct amount of insurance.”

He pointed out, though, that it becomes more costly as you get older and can quickly erode your retirement savings if purchased with super.

If you are using super to pay for your insurance, you might consider adding at least enough extra money to your fund to cover the premiums.

Mr Fuller also suggested reviewing your level of cover every few years.

“It is easy to reduce [cover] through your insurance provider or super fund,” he said.

→ Related: The key times to check the insurance in your super

Cover image source: Tom Wang/Shutterstock.com