They say knowledge is power. And that’s especially true when it comes to superannuation – the more you know about super, the better positioned you’ll be to plan for your future.
So just how much super do you need? What’s the best way to grow your balance? And how can you tell if you’re with the right fund? For a primer on getting retirement-ready, we asked Andrew Gregory, head of advice at UniSuper, to talk us through some of the most important (and common) questions around super.
Here are his expert tips for getting the most out of your biggest savings asset – and ensuring the next stage of your life is a great one.
How much super do I need to retire?
Andrew Gregory, head of advice at UniSuper
This is one of the most common questions Gregory gets asked about super. It’s also one of the hardest to give a blanket answer to.
To give you a ballpark estimate, the Australian Financial Security Authority (AFSA) publishes the Retirement Standard, which estimates how much Australians need in their super for a comfortable retirement. That figure is currently $690,000 for a couple or $595,000 for a single person.
It may be more helpful, Gregory says, to look at AFSA’s estimate of the income you’d need to be able to draw from your super each year to live well – currently about $70,000 for a couple and $50,000 for a single.
Bear in mind that there are lots of factors that can complicate these figures – including whether you own your home, if you have any additional savings, where you live, whether you intend to leave behind a little extra for your kids and what age you plan to retire. (And the age we retire is often a decision made for us by circumstance, Gregory says.)
How can I tell if I’m in a good super fund?
“Good is subjective,” Gregory says. “And there’s no exact science to this.”
There are, however, signs you can look for, Gregory says. The first is investment performance. Gregory says to look for a “track record of above-average investment performance over a minimum through a five-year period, but hopefully longer”. And the second most important factor is competitive fees, to ensure your balance isn’t being eaten away by administrative costs.
Gregory also recommends considering factors such as how well priced a fund’s insurances are, whether they offer additional member services such as advice or education, and how easy it is to access help and assistance. For a good measure of how well regarded a fund is in the industry, you could look at what sort of public recognition and awards it has (or doesn’t have), such as where it stands in the Chant West super fund ratings.
“And I think the final thing is that it’s got to give you a sense of trust and confidence,” Gregory says. “You’ve got to be with a super fund where you feel like you’re being cared for, that they’re listening to you or they’re easy to access.”
How can I boost my super balance?
The first and most important way to boost your balance over the long term, Gregory says, is simply by making additional contributions – either through salary sacrifice, or just transferring a little extra into your super every month. If your salary goes up, for instance, you may want to redirect some of that extra income straight to your super instead of taking it as cash.
Often, these extra contributions are taxed at a lower rate than your regular income, so you can “get a tax advantage” for making them – it’s the government’s way of encouraging you to invest in your retirement. You just have to stay under the annual concessional cap of $27,500, which is the most you can contribute to your super in a financial year without potentially having to pay more tax.
The other side to the coin is trying to reduce how much of your balance goes to fees and insurances. To that end, Gregory recommends making sure you’re in a fund with competitive fees, and consolidating multiple super accounts, so that you’re not paying more than one set of administrative costs.
It’s also wise, he says, to check the level of insurance you hold. You may be getting charged fees for insurance such as income protection, life insurance, or total disability cover – which, if you’re young, you may not feel you actually need right now (or you may want to keep, but at a lower level of cover).
Should my age affect my super strategy?
Yes and no, Gregory says.
“It doesn’t matter how old you are; the best tactic is to simply start trying to grow your superannuation balance.”
But you may have different considerations in your 30s and in your 60s.
For instance, the sort of investment portfolio you opt for might change with age. The market goes up and down over time. So while younger Australians might be happy with a higher risk portfolio that also offers higher returns, because they will have more years in the market to correct any losses, those closer to retirement will probably want to play it safe with a low-risk portfolio.
And our younger years are a great time to focus on growing our balance.
“When you’re in the early stages of your life, there is the power of compound interest and growth,” Gregory says. “And the best way to take advantage of that is to make sure you’re contributing.”
Of course, our younger decades are often when we’re also juggling things such as the cost of raising children or saving for a house deposit, so you do need to strike a balance.
But “the earlier you start, the better, because even small amounts starting at an early age compound to a large result by the time your retirement comes around”.
What’s changing in the future of retirement?
There are a couple of big things set to change the future of super and retirement, Gregory says.
For one, Australian super balances are generally going up: just 35% of superannuation balances in 2020 reached $250,000, but by 2060 that proportion is expected to double, meaning in the future, our super will be our second biggest asset behind our homes. And if you don’t own your home, your super will be the most important financial asset you have.
But another important change is that Australians are living longer than we used to. We may have more retirement years to plan for – meaning a healthy super account will be an important part of getting the most out of our next stage of life.
If there’s still more you want to know about super, now’s the time to ask those pointy questions.
“Don’t be afraid to reach out to your super fund to seek guidance – that access to professionals is often part of the fees that you pay,” Gregory says. “Seek advice and do so early. It’s easy to put super in the ‘too hard’ basket. But something simple that you do today can mean so much more for you in the future.”
For more than 40 years UniSuper has been making it easier to prepare for a greater retirement.
The information provided in this article is of a general nature only and does not constitute financial or business advice. It is important to consider personal objectives, financial situations or particular needs when making financial decisions.
