Your super is the key to having enough money to live comfortably in retirement. Yet many of us are letting our retirement dreams slip away by falling into some common, yet easy to prevent, super traps. Here are the top five super mistakes you should avoid.
1. Losing track of your super
According to recent figures from the Australian Taxation Office (ATO) as of 30 June 2016 there are over 5.7 million lost and ATO-held super accounts worth more than $14 billion. If you’ve ever changed your name, switched jobs or done casual work, you might have lost track of some of your super without realising it.
2.Keeping more than one super account
In 2017 there are about 29 million super accounts in Australia, which is an average of almost three accounts for every worker.
If you have different super accounts, you could be chipping away at your super savings by paying multiple fees and insurance premiums. That’s why it pays to always keep your super in one account. It will also cut down on your paperwork and make it easier to keep track of your super if you change jobs.
But before you move all of your super into one fund, make sure you consider any withdrawal fees, your investment mix and any insurance you may lose if you leave a fund. So be sure to speak to your financial adviser before making any decisions.
3. Assuming your employer’s default fund is right for you
Every Australian employer has to offer their employees a default super fund. If you don’t choose a separate fund to have your super paid into, this is where it will all go.
Around 80 per cent of Australian super fund members are in their employer’s default fund — and, for many, it could be the right choice [1].
That’s especially the case now that the Government’s MySuper regulations have created a new breed of default super funds, with lower costs and standard insurance benefits.
But if you would like more control over how your money is invested, you might prefer a fund that offers more investment choice.
4. Relying solely on super guarantee contributions
Under current laws, your employer must contribute 9.50 per cent of your salary to super each year. But research shows that at this rate, the average wage earner won’t even have half the super they need for a comfortable retirement.
That’s why it’s worth considering options like pre-tax salary sacrifices or personal contributions from your take-home pay to help grow your super nest egg.
5. Leaving it too late to boost your super
Even if your retirement is still a long way off, it pays to start building your super sooner rather than later. You might be surprised at how a small increase to your super now could have a big impact in the long run.
[1]. Stronger Super, Australian Government Treasury, 2013.
Source: Colonial First State, October 2014.