Picture this… when you were 21 years old your well-meaning but financially inept uncle put $1,000 into an ordinary bank account for you with instructions to leave it there and “let the bank’s interest turn it into a fortune”. You followed his directions only to discover 30 years later the balance of your ‘fortune’ was a paltry $6,023! What went wrong? Well, to put it frankly, you didn’t give it any attention.
This is a classic mistake that many Australians make when it comes to their superannuation.
There has been a lot of talk about superannuation in the news lately. How long has it been since you reviewed your superannuation to see if it’s on track to meet your retirement needs, regardless of whether your retirement date is two years away, or twenty?
Here are some questions to ask yourself:
Do you know how your super is invested?
Have you ever made any changes to your super to suit your own circumstances? If you’ve never made a change, you may still be invested in your employer’s default option, which may not be appropriate to your current or future needs.
The following example explains when a default option should be reviewed…
Brian (64) and Ingrid (29) work for Some Such Corporation. Their employer pays their superannuation contributions into the company’s preferred fund, which has a default investment option with a higher allocation to cash and fixed interest assets. This suits Brian as he has built up a substantial nest egg, doesn’t like risk, and plans to retire soon. However, it does not suit Ingrid, who is unlikely to retire for a further 35 years and accepts short-term volatility to achieve higher returns in the long term.
Are you making personal contributions to super?
Making ‘salary sacrifice’ or non-concessional contributions to superannuation is one of the most effective ways to boost your retirement savings. You may also earn additional tax benefits or government co-contributions. On the other hand, if you are making regular contributions, are you sure that you’re staying within the set limits and won’t be penalised for contributing too much?
Who will receive your super when you die?
Have you nominated a beneficiary on your account, or want to make a change to your existing arrangement, as your personal situation changes you will need to review your beneficiaries to ensure your super doesn’t end up in the wrong hands?
Does your super fund provide any insurance cover?
If it does, remember to check the levels of cover. You may find that your existing cover has become inadequate and it’s time for a review. You may be paying for cover you don’t need or alternatively, you may have inadequate cover, or policies outside of super that may be combined. But don’t make any hasty changes until you have sought personal advice.
Aside from your own circumstances shifting, superannuation rules change often, so it pays to review your super regularly. You don’t want to reach that long-awaited retirement date to find you don’t have as much as you had “hoped”. Give us a call.
Please note that this information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs. It is strongly recommended that you do not act on any information contained before seeking personalised advice from a licensed financial adviser.
Need financial advice in Adelaide?
We are qualified to discuss everything covered in this article and encourage you to contact us if you have further questions.
Prominent Financial Services would welcome the opportunity to help you. We provide financial advice and guidance to ensure our clients are financially educated to make smart financial decisions. Book a ‘Free’ Discovery Call Today!
- Assumptions: $1000 invested over 30 years averaging 6% interest with no additional contributions. Not including fees and charges.
- Sources: MoneySmart Compound Interest Calculator www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/compound-interest-calculator
