5 ways to sort your super out
Superannuation is a key way many Millennials are financially preparing for their future and it’s a great choice! It’s a smart long term and tax effective way to set up some preparation for future you. Plus once you’ve decided how you want to invest in your super, it’s fairly hands free as your employer makes the contributions on your behalf. Getting it set up right for you doesn’t need to be a hugely complex process, but it can feel overwhelming if you’re new to it and unsure what to do to maximise it. Soon we’ll touch on the 5 ways you can sort your super out!
One thing a lot of people may not realise is contributing to superannuation is investing! You aren’t just pumping cash into a savings account. The money you add to your superannuation is invested on your behalf by your super provider, according to the investment type and instructions you give your fund. We’ll touch on this a little later but if the whole idea of investing in shares is completely new to you, here’s a blog with 9 investing basics that can help give you a broader understanding of how investing works.
This post is for you if you’re looking to:
merge your super accounts;
find the best super fund in Australia;
find your lost super;
investigate superannuation fee comparisons;
or if you are simply wondering “how does super work”.
If you’re keen to learn more about superannuation, check out this episode from Glen James on my millennial money:
#1 get to know your current fund + check in on contributions
If you do not know where your employer is paying your super – that is a problem! But it’s OK! It’s easy to find out the answer. Simply look on your payslip or ask your employer. You’d be surprised how many people do not know where their super payments are going.
Once you find your fund, log in online (call your fund and get details, if needed) and make sure your employer has not been sneaky and skipped on paying you. By law they need to pay you every 3 months. Some pay per pay cycle and some monthly. Just make sure they are! It’s OK to ask your employer to clarify where they are paying your super if you have not seen contributions go in to your account. It’s a nice way to say . . . “I’m onto you!”.
Also ensure that your employer is paying the minimum required by law, which currently sits at 11% of your wage - but it’s set to increase to 12% by 2025.
#2 make sure your money is invested to grow
Every super fund has a mix of options for you to choose to invest your money in. Here is a hot tip: if you’re under 50 years old, you probably want at least 70% of your money in “growth assets”.
Yes, there are ups and downs in investment markets but you literally can’t touch your super until at least age 60 – so don’t get too paranoid about market shifts and just let it go to work. If you are worried about investment markets and you do have your money in anything less than 70% growth you need to change this. Can you get educated more to learn how growth assets work? Would you rather get a 3% return or 10%? This is real money so get reading, listening and learning how investing works.
One way you can start your education journey is to find out what an index fund is.
If a super fund has a conservative option, growth and high growth option – you do not need to mix and match these as they automatically do this within each option. Perhaps instead of having 30% of your money in the conservative option and 70% in the high growth option – just use the growth option for 100% of your money.
When you are looking at comparisons between different super funds, beware that some funds’ “balanced” investment option is different to the next fund. One funds’ “balanced” option may have 90% in growth assets and one may have 70%. So, do not go by name – you need to look for the asset allocation. An asset allocation is the % allocated to different assets (such as international shares, domestic shares etc).
Try to ignore the “top 10 funds” comparisons and tables. A lot of these websites only look at the last 12 months. Every fund has a different investment strategy. Any investment in the stock market needs to be over at least 5-7 years – so why would you bother looking at a 12-month period?
Lastly, do not chop and change investment options or super funds every 10 mins. It’s like a tree. Plant it somewhere good and let it grow, baby!
“Do not chop and change investment options or super funds every 10 mins. It’s like a tree. Plant it somewhere good and let it grow, baby!”
#3 check your fees are reasonable
Too often people choose their superannuation fund based on fees alone. Stop trying to get everything free. It’s OK to pay for stuff that is of great quality - especially relating to investing for the long term! Have you looked into whether a different fund that is more expensive from a fees perspective might have better returns after fees? Or one that is in line with your own values (like ethical investing)? It’s like choosing to buy a cheap pair of shoes made in the fast fashion industry - they won’t last as long as investing in a more expensive, but higher quality pair of shoes, plus they’re made in a way you don’t support (with cheap labour, ew). Invest in the fund that aligns with you, your values and the kind of investment you want to see with your money.
There are generally three fees associated with each super fund:
Member fee: this is usually monthly or weekly dollar amount;
Administration fee: this is a percentage and is levied regardless of the investment option you have;
Investment fee: this is a percentage and will vary depending on which investment option you choose.
Not all funds will have all three, but all will have an investment fee – older funds sometimes hid the administration fee inside the investment fee.
Glen James suggests that your super fee should be no more than around 1% (investment and administration fee combined). There are some really old super funds out there with fees about 2.5%. It’s crazy.
#4 check to see if you have multiple funds – you only need one!
Thankfully the government has worked out that it’s not 1992 and the Internet exists. You can log in to your mygov account and see all your super funds (as they are linked by your TFN). You may also have money in “lost super” which is like a designated holding account from that time you worked at Jay Jays in 2007 for 6 months. They typically kick you out of the fund they pay into if you’re inactive and it becomes part of the broader $18 billion sitting in lost super for people all across the country. If you’re unsure if you’ve lost super, check out this information from the Australian Taxation Office.
Your mygov account will tell you about lost super, too. You can also roll over all of your super into your main super account. If you do not have a mygov account, get registered anyway – it’s handy for other government services.
Warning: please do not move any super until you have any required insurances sorted out. Moving super can automatically cancel insurances you have and you may not be insurable again if your health has changed. Most of your super accounts will have some disability insurance which you need. If there is one area that you need some financial advice, it’s setting up insurances (that can be partially paid from your super). You insure your car so why wouldn’t you insure you? To learn more about personal insurances check out this blog with everything you need to know.
#5 consider ethical investing
Super is for your own future, but have you considered investing in the future of humanity? We are living in an era of choice now and you do not have to take part in things you do not believe in. Many superannuation funds have ethical investment options. These investment options usually attract a slightly higher fee – but not over the top! These options are usually not as stable in terms of return compared to your normal blended fund (they can be volatile) so maybe consider not allocating all of your super to just the one ethical option – but again, that’s your call!
If you’re not convinced what you are investing in, you need to watch this TED talk! WOW!
