Ask yourself this: when was the last time you looked at your superannuation balance? Do you know where your money is invested? Or, for that matter, how much you will need in retirement?
For all of the importance of having a healthy superannuation account to draw on later in life, most of us remain woefully unprepared for our twilight years.
We sense this, and tend to click past those sobering online calculators that reveal exactly how short we will be.
“Australians are getting better at looking at their super, but there is still the problem of people waiting until they are in their fifties to address it,” says head of external relations at AustralianSuper, Stephen McMahon.
“The earlier you start, the better.”
Whatever the relative health of your super balance, Mr McMahon urges people not to feel despondent.
“I think some of the projections for how much you will need in retirement can be overstated,” he says.
According to figures late last year by the Association of Superannuation Funds of Australia, couples seeking a “comfortable” retirement will need to spend $58,326 per year, which would require a joint superannuation balance of around $510,000. Singles seeking a comfortable retirement will now need to spend $42,597 a year and require a super balance of around $430,000.
Top it up
Mr McMahon says workers need to stop relying solely on the Federal Government to beef up their contributions.
“We would like to see the Federal Government put more into super than the current 9.5 per cent, but the reality is people need to start making their own contributions,” says Mr McMahon.
“Depending on what stage you are at in your career, adding a little bit extra a month can make a huge difference when compound interest is taken into account.”
An extra $50 a month in a 25-year-old’s super account will yield an extra $175,000 come retirement; this drops to an extra $32,000 for a 45-year-old.
Do your homework
Co-founder of independent website SuperGuide and author of Superannuation for Dummies, Trish Power, points out that workers should never assume their employer is paying their super correctly.
“Most employers are doing the right thing and this isn’t usually a problem, but if you are working for a smaller company it is worth checking,” she says.
She also suggests people determine exactly how much they are paying in fees each year and to compare charges for life insurance premiums across various super funds.
“If you are a young female, you may be in a fund that is full of older men and you could be paying higher premiums because you are essentially subsidising them,” she says.
“Generally speaking if your fund is charging you more than one per cent on your contributions, you should look into why.”
Track it down
What would you do if someone told you that you had won $20,000 in Lotto but in order to gain access to the money you had to fill out a series of forms?
My bet is you would be on to it, pen in hand, pretty quickly.
Well, that is exactly how locating lost super should be viewed, according to Ms Power.
“Not only will you have money instantly credited to your super account, but you will be earning interest on that amount and won’t be paying three or four sets of annual fees and insurance premiums,” she says.
To make the rollover process easier, Ms Power recommends seeking out a fund that you want to join that will roll over all of your old funds into the new account for you.
The long-term prescription
Ms Power says people need to focus on contributing what they can rather than stressing about not having enough money for retirement.
“In your 20s and 30s, you have HECS debts, mortgages and families to raise,” she says.
“Sometimes all you are able to do is turn up to work and claim your 9.5 per cent, and for a while that is OK.”
When you’re finances are in better shape however, you should look to prepare for your retirement.