1. Consolidate your super funds – maybe
I say maybe because sometimes it’s worth having multiple funds if there are distinct benefits, such as cheap life insurance. Get an expert to check this with you. If you are juggling a few super funds, then be aware that you’re paying multiple fees, which can erode your hard-earned savings.
Fees can eat away at your money, and if you’ve got one or more inactive accounts you’re missing out on a valuable contribution to your retirement.
For example, if you have three inactive superannuation accounts with $5000 in each, over five years the account-keeping fees will be around $7500. (The Australian Prudential Regulation Authority estimates the median yearly fees on a super account are about $500). If, for example, two of these accounts are inactive, you will have eroded your initial savings by about 50% in just five years. That’s a lot of money to make up.
2. Get your spouse to cough up
From July 1, 2017 the income threshold for a spouse contribution will increase, meaning more people will be eligible to claim the tax offset. You will be able to claim the maximum tax offset of $540 if:
- you contribute to the eligible super fund of your spouse, whether married or de facto, and
- your spouse’s income is $37,000 or less.
3. Check what insurance you have
Taking out insurance cover in super – including death, total and permanent disability (TPD) and income – can be attractive because the premiums are paid from the super contributions and/or balance so the cost doesn’t come from personal cash flow.
However, some common mistakes are made when arranging insurance through superannuation. One of these is not considering the effect the premiums will have on the balance at retirement.
“If you pay an average of $1500 a year in premiums over a 40-year working life, your super balance may be $230,000 lower at retirement,” says Suzanne Haddan, managing director at BFG Financial Services.
That’s because some of your contributions will be going towards paying for the insurance rather than being invested to help your money grow.
While the solution is to try to contribute extra amounts to cover the premiums, you should speak to an expert to ensure that you have the right amount of insurance – not too much and not too little – as your super balance is paying for it.
4. Check what fees you’re paying
“With most funds charging 1% to 2% in fees, make sure your choice is cost effective,” says Jason Petersen, a certified financial planner and head of wealth management at 5Financial.
“An extra 1% in superannuation fees over 30 years reduces your super balance by about $160,000, or $60,000 in present value.”
5. Consider your asset allocation
Consider your investment options to ensure they match your attitude to risk. One of the biggest mistakes people make is being too conservative.
Financial planner Catherine Sharples-Rushbrooke, from Advice Services Australia, says: “While it’s important to not take too many risks with the pool of money that needs to last throughout your lifetime, investing too conservatively may mean that results are quite low and funds may be extinguished sooner than would have been the case if a more balanced approach had been taken.”
If you really want to boost your super, remember a little can go a long way ….
If you’ve got a spare $10 or so, consider salary sacrificing. Let’s say, for example, you’re 24 years old and you give up one green smoothie each week and instead pop that into your super. Assuming 5% growth you’ll enjoy an extra $70,000 in your superannuation fund when you retire.