How one simple switch can supercharge your super

We’re often encouraged to put money into superannuation, but contributions aren’t the only thing that can help set you up for a comfortable retirement.

In fact, says Peter Hogg, general manager of guidance & advice at Aware Super, “as much as 50 per cent of your super balance at retirement may be determined by your investment returns”.

Those investment returns come down, in large part, to the portfolio type you select.

Research and advice can help you choose the right investment strategy.Credit: iStock

Because whether you know it or not, every Australian’s super is placed in an investment strategy that’s typically either conservative, balanced or higher risk, often known as ‘high growth’.

Higher-risk strategies are more susceptible to market fluctuations but yield a better return in the long term.

Conservative or balanced are less exposed to that short-term risk, but typically won’t make as much money over multiple decades.

And done right, choosing that high-risk strategy – especially when you’re younger – can make a huge difference down the line.

“Obviously, contributing to super is great and really important as well,” says Hogg.

“But if you’re able to invest your money wisely – particularly in those early years – you’ll get to take advantage of compound interest and grow your money a lot.”

How young Australians are embracing ‘risk’

Last year, thirty-something Catherine Clark decided to make the switch to a high-risk super strategy.

“My dad has done a lot of work on building his superannuation and made a comment one day how he wished he had switched over to high growth when he was my age, which made me look into it more seriously,” Clark says.

Making the change was easy – Clark simply logged onto her online super account, where she could quickly see her current investment option and switch it over.

Aware Super’s Peter Hogg

“I feel more positive and in control after making the switch,” Clark says.

“With a lot of economic instability at the moment, I know not to expect to see instant results, but with another 20 to 30 years of work ahead of me, I’m confident it will be the right decision in the long run.”

Peter Hogg says Clark is the ideal age to move her super investment strategy to high risk.

In your twenties and thirties, he says, you’re still typically decades away from retirement, giving you the benefit of a longer-term investment horizon.

“What you generally are looking to do [at that age] is take advantage of that time by effectively taking on more risk,” Hogg says.

“Having more growth assets in your portfolio gives you more time to ride any ups and downs – any impacts from things happening around the world, which we’ve seen recently – and you get the real power of compound interest.”

That’s because higher-risk investment strategies are typically invested in shares and property – asset types that typically move up and down with the market but get a better return in the long run. Just think about how much a typical family home appreciates over the decades.

But your approach to risk in super should change as you get older.

In your forties, Hogg says, you might start thinking about adjusting your investment strategy – talking to your super fund or financial advisor can help you navigate this, with risk tolerance influenced by factors like health, income stability and the age you plan to retire.

Certainly, in your fifties and beyond, you’ll likely want to dial back some investment risk, so you’re not overly exposed to market fluctuations right before you start drawing on your balance.

Whatever you do, review

If you’re not sure which risk approach to take, it’s a good idea to chat to your fund about your options.

“Aware Super has many no additional cost options where you can have that conversation, work through the different options and see what’s right for you,” Hogg says.

Taking the time to understand your investment strategy now can make a big difference at retirement age. Because when it comes to our super, a little risk can mean a lot of reward.

“History shows us that if you’re willing to make those sorts of investments, and you’ve got time on your side, you will get a better return for your money,” Hogg says.

“So much of your retirement balance will be dependent on how you’ve invested your money over the years.”

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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