Superannuation – it supports you for decades in later life, but is often disregarded by young people as something not to worry about. It can also be misunderstood by people approaching retirement.
Being better informed about your super nest egg will allow you to enjoy travel and all the finer things in your well-earned retirement years.
We ask super funds to bust some of the common myths surround superannuation.
HESTA CEO Anne-Marie Corboy says that people often mistakenly think that super advice is for those who are toward the end of their careers.
“Establishing good money habits early in life can help avoid financial stress and put you in a better position later in life,” says Ms Corboy.
“For example, putting extra into super at a young age can significantly boost your super over time, due to the effects of compound interest.”
“The reality is, it’s never too early, or too late, to seek advice,” says Ms Corboy.
The current superannuation guarantee rate is 9.5 per cent of your income, but speak to your employer about voluntarily contributing more. It’s a small amount each fortnight that adds up.
You won’t automatically save enough
Superguide.com.au estimates that singles will need to retire with $785,000 to be able to live comfortably.
That provides an individual income of $42,158 per year, while the aged pension is only $21,913, below what the Association of Superannuation Funds of Australia recommends for a modest lifestyle.
CBUS Head of Advice and Retirement Greg Harper says that the age pension doesn’t provide a very good living standard.
“The age pension provides for a very basic standard of living only, without provision for quality of life in retirement,” says Mr Harper.
But if you don’t have a hefty amount put away when you retire, don’t worry. Those who are eligible for a full pension can afford to retire with less, according to Superguide.com.au.
“There are many smart ways to enhance your financial situation and use Centrelink benefits and your super money to great advantage,” says Mr Harper.
All super funds are NOT the same
As important as shopping around for a mortgage is, Mr Harper says that it’s also important to carefully select the right super fund for you.
“All super is the same – definitely not correct!” he says of one of the biggest myths around superannuation.
Some funds pay commissions to financial planners out of your account, some also have greater overheads and financial obligations to shareholders and as a result have higher fees, some distribute all profits to members.
Mr Harper says that there can be a big difference between a superannuation with high fees and one with low fees.
“It could be enough to buy a car or take your family on a nice holiday when you retire.”
Canstar allows you to compare superannuation funds based on whether you’re a young person looking for low fees, or a pre-retiree looking for conservative investments.