According to the Australian Bureau of Statistics, more and more Australians rely on superannuation as a source of income for retirement. That’s why more Australians are becoming more interested in their own super — learning about how the system works and how to better manage it.
With information at our fingertips every minute of the day, people are much more informed than previously, making the challenge to decipher the real from the fake more challenging than ever. Getting the right information is vital as it may greatly impact your retirement savings and ultimately, your financial future. Here we start to debunk some of the super myths and misconceptions so you can make informed decisions about your future.
Here are our top four super misconceptions…debunked.
1. “My super is beyond my control”
The super landscape has changed considerably since compulsory superannuation was legislated in 1992. Since 2005, Australian workers are able to choose a super fund for their retirement savings, rather than a fund specified by their employer, and more choices have seen self-managed superannuation funds (SMSF) grow in popularity.
An SMSF gives you greater control over your funds. By gaining full control, you then take on the responsibility of making all the decisions, taking over the strategies and investment choices of the fund.
There is now a greater choice of retail and industry super funds and varied investment options, as well, as more Australians seek to take back their power of choice through increased understanding and product providers providing greater transparency and education.
Many funds now offer a wide range of options beyond conservative, balanced, and growth. Some even often a pseudo-SMSF option where you have control over direct investment in shares, exchange-traded funds or term deposits.
However, SMSFs are not fit for all. How it works for your success will still depend on your lifestyle and personal circumstances so it’s best to engage a professional to discuss your options.
If you would like more information about superannuation fund options, watch the recorded webinar of Superannuation – Retail, Industry or SMSF? and learn as the Banks Group superannuation experts share how you can take control and supercharge your super. Watch it here.
2. “I’ll think about my super later – I’m still young and far from retirement”
The time to plan and pay attention to your superannuation is now. Retirement planning is not something we should put off until a later date. Give your retirement savings a boost with the benefit of time.
Consider your current age, your expected retirement age, and your risk capacity when making decisions regarding your super. One of the best ways to get the most out of your super involves an age-based investment strategy. A long-term approach enables your investment to ride out the natural cycles of highs and lows rather than relying on hope and chance that makes markets and economies perform outstandingly well over a short period of time.
3. “I’ll keep my super in a few funds for diversification”
You may think having your super allocated to multiple super funds means you’re diversifying. However, it also means more fees to pay and it’s harder to keep on track of your super savings.
You may consider consolidating your super. By maintaining several accounts, you could be paying administration fees that you don’t need to in order to achieve your objectives.
Consolidating your super means combining your super accounts — less paperwork, save on fees.
Many super funds also offer insurances so it’s important to review your needs and eligibility before consolidating. When reviewing your super, it is best to consult a professional in relation to any possible investment or tax implications.
4. I’ll lose my money if the market crashes
All investments carry some degree of risk. The level of risk associated with investment typically associates with the level of return the investment could achieve.
Every person has a different risk tolerance as the willingness to take on risk depends on factors that constantly change such as your age, your personal circumstances, income and expenses, and how long you have to go until you meet your retirement age. Investing early and for the long term will allow you to ride out shorter-term market volatility with more time in the market.
There is a wide range of investment options in super funds that reflect the different risk profiles of our clients. Your financial planner can help you better understand what it means to you. With the help of an experienced BG Private Clients financial planner, you can view fund performance, market reports, re-evaluate your risk and reduce exposure to volatile markets as you get closer to retirement.
Seek professional advice
It’s important to make sure your super is working for you.
By taking a proactive and more educated approach to your super, your investment strategies can be better managed as your risk profile changes throughout your life.
Speak to one of our super experts about your retirement savings here.
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This article is intended for general discussion and is not intended to represent specific advice. BG Private Clients shall not be responsible for any entity that acts on any of the comments in this article without first obtaining specific advice from BG Private Clients. For further information, please click here.