Now Trump’s in charge, here’s how to safeguard your super

It’s been a wild ride on markets since Donald Trump took charge – $50 billion down one day, all-time highs almost the next. Then – some weeks – rinse and repeat.

The VIX volatility index over the S&P500 in America, the so-called index of fear and greed, has pushed into the high range several times in January/February.

It’s been a rocky ride for sharemarkets since Trump took charge.Credit: Stephen Kiprillis

In case you missed it, sharemarket swings affect us all. With virtually every Australian having exposure to the market within their superannuation fund, you need to implement emergency action.

Here’s my SOS solution – not necessarily to “save” your super, but to help you implement a volatility resistant super-safety strategy.

S: Sort your super

Let’s start the sanity check by making sure you’re in the right fund. The average balanced super fund grew 11.1 per cent in 2024, according to SuperRatings, and yes, that was a volatile year too. The median growth fund (one more exposed to shares) increased an impressive 13.4 per cent.

All other things being equal, it’s mathematically better to put money into super than your mortgage.

Over three years, the respective returns were 5.2 per cent and 6.1 per cent a year. These return figures include fees, so they bake in the benefit/detriment of what you pay for the management. With just a quick glance at your statement/super portal, you’ll see if your manager makes the grade.

While we’re on fees, consolidate straggling super funds, those you may have forgotten about or misplaced several jobs, residences or even names, ago. You are paying fees – including expensive insurance – on every one.

There is more than $16 billion in lost and unclaimed super money in Australia; once it becomes “unclaimed”, it also starts earning a pittance as it is no longer viably invested.

A quick look at your ATO profile on myGov will reveal if you have misplaced any money. You can also compare super fund performance then easily consolidate into one winning fund. That brings us to the next step.

O: Optimise the system

I believe we are so lucky in Australia that 11.5 per cent is saved for us by our employers for our retirement. But there are ways to ensure extra money goes into your fund either free or for less.

A program called the superannuation co-contribution allows eligible Aussies to collect a bonus up-to $500 in super from the government every year. To be eligible, you need to earn under $60,400 a year (and you need to be earning in some respect).

Then, provided you pay in $1000 after tax in a financial year – only slightly more than $19 a week – the government will automatically put the $500 on top.

The next enormous way to work the system is brilliant if your household has unequal salaries – one spouse earning a higher amount and another earning below $40,000, say because they’ve put career on hold for kids. (They don’t have to be working at all.)

Here, an after-tax spouse contribution of $3000 nets the payer as much as a $540 tax offset. This is a straight-up tax discount so not only does great things for the spouse whose super is suffering, but it also gives the family a nice budgetary boost.

The final step in this strategy deserves it own “way to work the system” category.

S: Salary sacrifice

When you pay money into super before tax, you swap your marginal tax rate of up to 47 per cent – including the Medicare Levy – with a super contribution tax rate of only 15 per cent.

That means you immediately make more of your money – a higher amount is invested straightaway than you would get in the hand. This is why, all other things being equal, it’s mathematically better to put money into super than onto a mortgage.

You can make such before-tax contributions either by arranging with your employer to salary-sacrifice directly into super or by what’s called a personal deductible contribution.

The latter involves paying after-tax money into super, but then converting it to before tax by filling out an “intent to claim” form with your fund that allows you to deduct the contribution from your assessable income when you file your income tax return.

Incidentally, this is a great way of reducing capital gains on an asset sale. The massive advantage of paying (or snaring) extra money into your super fund when prices are low is that you buy more shares/units. Then, when markets inevitably go up, you have more of these to grow.

An investment concept called dollar cost averaging shows that regularly investing such as this turns volatility into opportunity. And that’s about the best anyone can hope for in these unprecedented investment times.

Nicole Pedersen-McKinnon is author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, X and Instagram.

• Advice given 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.

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