How to boost my super balance?

How to boost my super balance?

Superannuation is how most people save for their retirement during their working life. Employers must contribute 9.5% of your taxable income to your super. This is set to rise to 10% from 1st July 2021 and progressively up to 12% by July 2025.

If you rely on those contributions to superannuation alone as your savings vehicle, unfortunately you might end up with insufficient balance to provide you with your needed retirement income once you stop working.

As a rule of thumb, most people generally require around 60 to 65% of their pre-retirement income to live comfortably.

Super is regarded as an effective and preferred way to invest for the future, due to the many tax benefits it offers.

So today let’s check 9 ways to boost your super balance and to make it work for you as hard as possible.

If you don’t know me, my name is Katherine from About Retirement, I am CFP and I started this YouTube channel as my way of helping as many people as I can to be financially prepared for their retirement. I spent over 20 years in financial planning industry, and I have seen prove how good planning can help you reach your desired goal and how lack of planning can lead to a financial disaster. And it is really my goal and my mission to make sure that every single person I speak to, will somehow benefit from our conversation, my knowledge and my experience, as I am sick and tired seeing mistakes being made mainly due to lack of understanding or seeing big companies, taking advantage of small investors with smart advertising and fancy brochures. 

Our today’s topic is: how to boost my super balance and retire with more.

1. Extra super contributions 

This is an obvious one, the more money you contribute, the more you will have for your retirement, but there are so many ways you can make those contributions, and you really need to be smart about the most effective way that will work for you and provide the biggest benefit for you. 

The choice of contributions will depend on your personal circumstance, income level and stage of your life. 

I have created a extensive library of videos by now about different types of super contributions – from un-deducted contribution (or non-concessional contribution as the correct industry name is), to concessional personal contribution, salary sacrifice, spouse contribution, or contributions splitting or downsizer contribution – this is the one I have to prepare for you. 

Think also: is there any other benefit I can get based on contributions that I make: is it a tax offset, general reduction of your tax bill when preparing your tax return, or maybe the government co-contribution.

So understand those contributions, understand your benefits and Be super-money smart, every extra contribution helps!

2. Risk profile

The investment risk profile you chose may have big impact on the level of growth of your savings. The higher the risk, the higher the return over time, but also that increases your fund’s volatility, meaning greater rise and fall not only of your annual returns but of the value of your asset. So, what’s your risk profile? What level of risk, volatility and loss are you able to accept?

One thing that I do need to underline here. Our life expectancy is so much longer than the previous generation and generation before. If you retire at the age of 65, you are expected to live well into your mid 80s or even 90s. That indicates to me 25 to 30 years in retirement. This is a very long time to be provided with an income from your savings, and one of the ways you can help your super balance stay as high as possible is not to be too conservative with your investments, even if you have to accept a greater degree of market volatility overtime. 

 3. Insurance 

Insurance is an essential part of planning for reaching your financial goals. Sometimes it is very beneficial to keep it within the super fund, but not always. It depends who is the intended beneficiary and what outcomes you are trying to achieve. Tax can also be of great issue as well as access to insurance payout. If you met the requirements of insurance underwriters and your claim has been successful, but you have not met conditions of release. Under this circumstance your insurance payout will get stuck in your super fund, but no money will be paid out to you.  That would be a devastating scenario.

Another issue is to check the level of actual cover. Do you still need that insurance cover? Do you need that level of insurance cover? The insurance company might happily continue the cover for you, as premiums keep going up in price when you get older, but your loans might be paid off, your income position might have changed, maybe cover outside the super would work better for you, maybe another company is more competitive pricewise, or you get a better tax deduction if paying personally for premiums, as oppose in super. 

This is where checking your financial situation is essential, and there is no right answer, as it all really depends on you, your income, your super, your age, your tax rate etc. 

But if you no longer need that level of cover, or it is beneficial to have insurance outside the super environment and not subject to super regulations, than take it out and money otherwise spent on premiums the cover that does not serve you to help grow your super savings. 

4. Investment Diversification 

 I always say that diversification is King investment world – we all know the saying: “Don’t keep all your money in one basket” and there is lots of truth to that, as diversity of your investments is essential to:

• reduce the risk – if you buy shares in one company, no matter how big, prestigious and well known it is, you are at mercy of that one company’s performance – think AMP that used to be a stellar financial services company, one of the oldest, well if you had all your savings invested in that one company, you are toast. So investment in several companies will automatically reduce your investment risk.
• by diversifying we can invest in different types of stocks, markets, financial products
• to achieve this level of risk reduction, you should really consider: geographical diversification – investments not only in Australia, but across other countries as well.
• you should diversify between different asset classes: cash, fixed interest, property and shares – each of those assets provide different returns in different economy cycles, some will provide income only, some capital growth and others might provide mixture of both. 
• within each asset class, diversify deeper into different industries: energy, financials, materials, healthcare, industrials, real estate, telecommunication, utilities and many more
• but then diversify within each industry, especially if your investing preference are direct shares: so if you want to invest into telecommunication, invest into Telstra, a bit struggling now again, but also to a smaller company such as TPG. Due to company size and different customer base, they can give you different investment outcome. A similar example might be: if you want to invest into banking, don’t invest into big 4, they all perform exactly the same way in the same period of time. but if you pick say CBA and a small bank such as Bank of QLD or Bendigo Bank, you will find less correlation between them. Those are not recommendation, but rather examples of the principle. 

I could talk about investing forever, as I love this subject, but we are short of time here, so for now, I invite you to download my eBook: “12 Principles of Investing“ that goes into more details how to be a successful investor. 

5. Exposure to growth 

It is very hard to make your superannuation savings grow without exposure to growth assets. Keeping money in cash long-term is not the way to go. So, how much exposure to growth assets is correct for you and what type of assets should you be investing into? I hope I managed to prove to you that investing into a well-diversified, growth-oriented fund, that will provide an income benefit for your life is essential. If you are too conservative with your investing, you run the risk of outliving your savings, and this is the worst possible outcome.

6. Fees and Charges

Nobody likes to pay fees, but the fact remains that if you want to invest into quality assets, you need to accept some costs. The question is, do you have the right assets and are you paying the right price for them. What fees are acceptable and when are you paying too much?

Go over your superannuation statement and check the fees:

• if you are paying a lot for administrative work, that other super funds provide for less, then it is a reason for your concern
• if you see higher fees for fund managers, those are the people that actually earn your return, not the super fund trustee at all. So have a look at the performance of the fund. If their performance is positive and satisfactory, then I believe that the fee is justifiable, if not, then change that fund manager for another with a better investment track record. 
• Check trustee fees, account fees or any other that are hard to understand and question them. 
• I have already mentioned the issue of insurance, which can be a major expense for your super fund, so make sure you understand your insurance and you really keep what you need, as I have seen many, many situations, where super accounts were going backwards and depleting in value due to extremally high insurance fees.  

So up until now, have you found any beneficial information that you can implement to your super check-up? If yes, click that LIKE button and SUBSCRIBE as I do create a new video every week to keep you up to date with those important money details.

7. Find your lost super

It is very easy to lose track of your super if you changed jobs several times over the years, especially with casual and part-time jobs. So not only you could be paying several sets of fees, but most likely your super savings are not even invested for your benefit. 

There are companies that make fortunes by searching for those lost super funds, then writing letters to the account holder and providing you with information for a fee. Well, it is so very easy now, just go to the ATO online, and search via MyGov by going to Manage My Super.

If you are not registered, I will list the link below the video: https://www.ato.gov.au/General/Online-services/Using-ATO-online-services/?anchor=BK_1CreateamyGovaccount#BK_1CreateamyGovaccount

8. Consider consolidating your super accounts

This is the advise you must have heard millions of times, and in some cases it is a good advice, but it really depends on what you want to achieve. Sometimes there is a reason not to have one account, especially in retirement, when we are structuring income to benefit tax, Age Pension, security of income, capital growth, risk reduction of the investment portfolio. One super fund is unable to provide all those benefits. 

Also, before you transfer money to another super fund, check the exit of withdraw fees, check any possible tax implications or loss of benefits that might be important for you and the new super fund does not provide, such as insurance cover. 

As you can see, nothing within retirement savings, superannuation, financial planning is straight forward. So I really hope this video will help you, but I honestly believe if this topic is not very clear for you and you struggle to make it work or you just cannot be bothered with the amount of work involved, which is a lot, my best suggestion is –

9. Ask for a good financial advice,

Especially retirement advice – talk to people who understand this area, have been doing it for years and have knowledge and experience to support their claim to be able to help you.

You can contact me, most welcome every time, but if you have your own entrusted adviser, good on your, congratulations and keep that person on, as the benefit can be enormous. 

So let’s recap, those 9 ways to improve your super:

1. Extra contributions
2. Risk Profile
3. Insurance
4. Investment Diversification
5. Exposure to growth assets
6. Fees and Charges
7. Find your lost super
8. Consider consolidating
9. Discuss it all with a Financial Planner

Which of those steps are the most appropriate for you and which ones you believe would assist you the most?

Please leave your comments and questions below the video, I would love to know what you think, if you agree or disagree and maybe you can mention other steps that you take to improve your super and investing outcome.

And now, I would like to show you extra videos that can continue helping you with your superannuation decisions, the most appropriate contributions, how to save on tax and many other issues discussed and explained.

The second lot of videos is if you have already retired and wish to understand Age Pension system and how to improve your benefit if you are not receiving the full pension.

If we all create a life of security, prosperity and joy, the world will be a better place. Talk next time.

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement

Here is the article you might be interested in:

• Property, Shares or Super? What is better?
• What is included in the Age Pension Assets Test?