The seven myths to bust about your superannuation
The nation’s superannuation system is worth $2.8 trillion dollars but there are many myths that need to be debunked which impact your retirement savings.
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Australia’s superannuation retirement savings pool is mammoth.
At $2.8 trillion dollars, it ranks as one of the world’s largest.
But with its vast footprint comes a profusion of popular myths.
We’ve asked finance specialists to debunk seven widely-held super delusions.
MYTH ONE: YOU MUST EARN A MOTZA
“It’s not about how much you earn, but what you do with it,” Dominic Aarsen, the founder of the advice hub Make The Most of Your Money, said.
He said fewer than 20 per cent of Australians chose how their super was invested, despite hundreds of investment options including high-growth funds that might be risky.
“But the key in mitigating that risk is time, so if you were to select your investment choice with plenty of time – 10 years prior to retirement, you can reap the benefit of higher returns,” Mr Aarsen said.
MYTH TWO: SUPER’S ALL ABOUT FEES
“It’s actually about the net return you get after fees,” Mr Aarsen said.
Avoid assuming that, because a fund’s fees were low, a better return was inevitable, he said.
MYTH THREE: IF YOU DON’T WORK, YOU CAN’T CONTRIBUTE
The fact is you can bolster your super fund with spare cash, even if you are less than fully employed.
“Think women on maternity leave or dropping from full-time employment to casual – or part-time work that may not pay super,” Mr Aarsen said.
Your effort would enable you to stay on track and keep building your balance, he said.
MYTH FOUR: CANBERRA CAN SNATCH YOUR SUPER ANY TIME
The director of the financial advice firm What If, Conaill Keniry, said your super cash was invested in an underlying asset such as shares.
Mr Keniry said the asset did not belong to the authorities, and described the assumption that it did as “just wrong”.
“So the government can’t just take your money – much like they wouldn’t come and take your house,” he said.
MYTH FIVE: SUPER IS A PASSIVE PREDICAMENT
Verve Super chief executive officer Christina Hobbs said people often felt “fatalistic about their superannuation” and they assumed there was little they could do to boost their balance. “But actually the simple act of rolling all your super into a well-performing fund can save you tens of thousands of dollars – or more, by the time you reach retirement,” Ms Hobbs said.
MYTH SIX: SUPER IS AN INVESTMENT
It’s not, said independent financial adviser Peter Horsfield.
“It’s a tax structure,” he said.
And a low-tax structure at that, with 15 per cent charged on deposits and earnings during the savings phases and zero tax charged to most retirees.
MYTH SEVEN: YOU CAN DO BETTER YOURSELF
The “chances are slim” of getting a better return by managing your super yourself, Mr Horsfield said.
Consider the fees, time, administration and likelihood of outperforming professional investors, he said.
If you could do all that “then really you might want to think about running a super fund for others and have them pay you to do so”.
Originally published as The seven myths to bust about your superannuation