Super simple: Top tips to set yourself up for retirement

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If you were to take a graph of how much Australians thought/cared about their super and compared it with their age, you’d likely find them both rising in tandem. Despite us having a world-class retirement savings system, it’s something few of us care about until we hit our fifties or so, often with some panic about if we’ll have enough to live off once we retire.

A recent survey found 50 per cent of Australians think super is “overly complicated”, but it’s important to think about it while you’re young.Credit: Aresna Villanueva

But super is slowly becoming something we’re paying attention to earlier in life, thanks in part to efforts by the government to improve the quality and transparency of our superannuation system. Recent increases to the superannuation guarantee, bumped up to 11 per cent this month and legislated to rise to 12 per cent by 2025, have also prompted more discussion around the importance of improving our retirement savings.

A survey by the Association of Superannuation Funds of Australia (ASFA) in 2021 found nearly two-thirds of Australians understood how superannuation works, and a majority (55 per cent) said they were happy with their current super fund.

What’s the problem?

However, in that same survey, more than 50 per cent of people agreed that superannuation was “overly complicated”. And that’s fair enough. The superannuation industry is massive ($3.3 trillion, give or take) thanks largely to compulsory employer contributions, which began in the early ’90s. There’s a bevy of conditions, concessions, tax breaks and restrictions to keep on top of, so it’s no wonder the average worker tends to tune out until later in life.

What you can do about it

However, if you never think about your super, you could find yourself left with less than you deserve by the time you hit retirement age. Here are some tips to keep on top of your super for every stage of life:

• 18-30: Early in your career, you’ll mostly be focusing on getting your super sorted so you’re set up well for later in life, as your balance will still be quite low. Xavier O’Halloran, the director at Super Consumers Australia, says the key decision at this age is what super fund you pick. “This is a more important decision than ever before because you are now stapled to your superannuation fund when you move between jobs,” he says. O’Halloran advises workers to use the ATO’s super comparison tool to ensure they don’t get stuck in an underperforming fund. Those who have bounced around jobs should also use the MyTax portal to consolidate their super, he says, as having multiple smaller funds means paying unnecessary multiple fees which can eat into your balance.

• 30-50: At this age, many are considering starting families or buying their first home, so it’s important the level of insurance you receive through your super fund is adequate, Shane Hancock, head of member products, guidance and advice at AustralianSuper says. “A new partner, new baby or new mortgage could mean you need more insurance protection to pay your bills if anything happens to you,” he says. Super funds typically provide a certain level of life insurance, permanent disablement cover and income protection. It’s also worth looking at how your super is invested. It may be worth considering switching your fund to a higher growth option, as given you are still some years from retirement, there’s still plenty of time to ride out the volatility often associated with higher growth investments.

• 50-67: It’s usually in our pre-retirement years that we start thinking about when we’re going to retire and how much we’ll need to retire comfortably. The government’s MoneySmart website provides a handy calculator that can help determine this. It also might be time to start thinking about topping up your super, O’Halloran says. “The kids might have moved out of home, or you may have been fortunate enough to have paid off your mortgage, so this is a time when people start putting extra money in, which can be a good tax saving as well,” he says. Investment earnings in super are taxed at just 15 per cent and contributions up to a cap of $27,500 (including your employer’s compulsory 11 per cent contributions) are also taxed at 15 percent. You can also contribute up to $110,000 a year of your after tax money to your fund. Depending on your account balance, you may be able to contribute more by carrying over unused caps from previous years.

• 67+: By this age, most of us will be retired or retiring, and will be able to start drawing down from our super. O’Halloran says it’s important to determine how much you need to live on, and not just stick to the minimum super drawdown rate. Many in this age bracket will also be eligible for the age pension, so it’s important to work out how it and your super can work together to support you in retirement. “While some of your retirement income may come from the government age pension (if eligible), you can also turn your super into a regular income with an account-based pension to top up any age pension you may receive,” AustralianSuper’s Hancock says. “This way you can enjoy life after work while keeping the rest of your savings invested to help last the distance.”

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 any financial decisions.