Setting your super on fire
You want your super to be all guns a blazing for as long as it can till retirement, and that includes making sure you’re not shelling out too much in fees.
A small effort now - making sure you are invested in the right fund and the best asset classes for your stage of life - can make a big difference to your retirement lifestyle.
Regardless of whether you have chosen your own superannuation fund or defaulted to the fund your employer is with, you should know what option you’re invested in and why.
1. Check out the competition
Just how does the performance of your super fund stack up? Is it the best in its class?
What has happened this year is not nearly as important as what’s been happening over the past seven years or more. You want your super fund manager to be a consistent performer and a longer time frame lets you gauge this.
You don’t have to review every fund to work out how you have gone. Super ratings agency Chant West has the average performance figures available. According to Chant West, a balanced fund has only returned 6.2 per cent over 10 years. For some perspective, Australian shares have returned well over 8 per cent.
The Australian government’s ASIC website also gives a good guide to superannuation comparison tools. What you want is a table like this that compares your chosen fund with the average among its peers to show you where your fund ranks.
Don’t get too caught up in fees. You would rather be paying for a good super fund manager making you lots of money than paying for one that isn’t pulling in as much. If your super is blazing away after fees, it’s money well spent. The alternative is to pay less and be less wealthy.
2. Fees and costs
Look for the Management Expense Ratio (MER), which is how much you are charged for the super fund to actually manage the money and invest it for you. It’s usually between 0.2% and 1% of your super account balance.
The other fee is your administration fee, generally $1.50 per week. It’s pretty common but $78 a year can add up, which is one of the reasons it’s wise to only have one account. If this money went to building your retirement savings instead of fees, you would be an extra $22,000 richer over 40 years - the cost of a new car.
3. Keeping informed
If you haven’t heard from your fund in a long time or you use your statements as recycling paper, pick up the phone! To start with you need to know what investment option you are invested in and your balance. Is your investment option suitable for your stage of life? What might be suitable for a 30-year-old building their wealth is likely very different to that of a retired 70-year-old.
You are free to ask any question of your super fund about your super and you should be given very clear answers. You can even view and access your account online, a bit like internet banking.
Knowing how your fund stacks up against its peers and what this might cost you is the start to setting your super on fire. Keeping it alight is a matter of staying informed the best way you can.