Not so super after all

Wilson Luna

If you don’t ‘play the market’, you might think that the share market’s recent ups and downs really aren’t your problem … but have you thought about your retirement investments? Since your super might be invested in shares, it might be a good idea to pay attention to how it’s doing.

The stock market has been extremely volatile lately, rallying a bit when there’s some good news – and plummeting back down again when there isn’t. All that frantic activity is enough to give anyone vertigo, and make anyone who doesn’t rely on the whims of the stock market breathe a big sigh of relief. But before you get too complacent, it’s worth remembering one little thing: where your superannuation is invested.

Even if you don’t manage a share portfolio directly, chances are you’re invested in the market through your superannuation. And when those retirement investments don’t perform there can be serious consequences down the line: many Aussies are already working past retirement age because they can’t afford to stop, or transitioning to part-time work to supplement their income.

Sounds scary, doesn’t it? But before you start going grey, remember this: super is a long-term investment, so it’s how it performs over a number of years that counts. So the fact that the market’s been on the dodgy side lately doesn’t necessarily mean your superannuation is going to disappear. But it does mean that you need to be super-savvy to make sure you get the best results possible and have a big enough nest egg to enjoy your retirement.

Asking yourself, ‘How much do I need to retire?’ is a good place to start. The latest ASFA Retirement Standard shows that a ‘modest’ retirement will cost a couple $31,519 a year, with a ‘comfortable’ retirement pricing in at almost $55,000 a year – requiring a half-million dollar lump sum to make it possible. While that gives you a number to aim for, it’s important to remember that the cost of living in Australia keeps going up and you’re going to have to adjust the amount accordingly.

With that in mind, let’s take a look at how super funds have been performing. According to the Australian Financial Review, although the average balanced super fund posted gains of 9.2 per cent for the year to June 2011, the overall returns over the last five years were a paltry 2.3 per cent. That’s not great, and things aren’t looking any better so far this financial year: Chant West figures revealed the median growth super fund fell 1.5 per cent in July.

But unless you’re planning on retiring sometime soon, you’ve got time to take charge. The big problem is that the majority of us put our nine per cent super guarantee away and think that we’re doing enough – but the reality is it’s nowhere near it. Once you take into account fees, charges and even life insurance premiums (if they’re included in your super), that nine per cent gets eaten away pretty fast. Add in low returns, and the average Aussie could be looking at a less-than-adequate nest egg at retirement.

Superannuation is your investment, so it’s time to get interested and make sure it’s doing what you want it to. That doesn’t mean panicking every time the market dips – just making sure that your returns and your contributions will add up to the retirement lifestyle you want. And a great place to start is with these tips.

Less is more
Consolidate your super into one fund (making sure it has a history of strong returns) to save on fees and charges, and make sure you round up any lost super balances as well. There’s one lost super account for every two Aussies, so chances are good that you’ve got one waiting for you to find it!

Take control
Even if you have a managed fund, it’s your responsibility to know how and where it’s invested, and to choose balanced or growth options. It’s important you understand what you’re willing to risk – and how much you’re going to need to be comfortable in retirement.

Get money for nothing
See if you qualify for the government co-contribution to make the most of the ‘money for nothing’ it offers, and if you’ve never thought of it before, consider a salary sacrifice – the tax benefits can be great.

The quality of your retirement lifestyle is going to depend heavily on your super, and that’s a really great reason to make sure it’s giving you the results you want. Because while the stock market can go up and down, it’s better if you can make sure your super just heads in one direction: up!

Author's Biography

Wilson Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.