Most Australians are passive when it comes to super; they let it sit there. But these five simple action steps can actually boost your chances of retiring with more.
Around 9.5 million - or 80 per cent - of Australians sit in what's called 'default' super. When they get a job, they go in the automatic 'default' option.1
"There is a danger in that, because it may or may not suit you," says Westpac Financial Planning Specialist, David Simon. "A lot of people got caught out massively in the GFC just because they didn't take the time to invest in something they're comfortable with."
The alternative to being passive is to get active; to become engaged with super. Simon says there are no guarantees with anything, but getting more active with your super means there is a greater prospect of retiring with more money.
The key to getting more active with super is to recognise that you not only have control over what you invest in, but also lots of opportunities.
Simon recommends these five simple ways to get more active with your super:
Get active and set goals. Work out when you want to retire. Is it 60 or 65 or 70? When do you need to access your super money? How much do you need to retire on?
You can then work out the difference between where you are now and where you need to be. You might have to save more, or invest in higher-returning assets.
How much you retire with depends largely on your investment mix. One of the most important choices is between 'growth' and 'defensive' assets.
Growth assets, such as Australian shares, are more volatile. But over time they generally return more, so have the potential to boost your super savings. More conservative defensive assets, such as bonds, might help you sleep at night because they don't move around as much. But, compared to growth assets, history has shown that they under perform in the long run.
The key is to get active and choose the investment mix that suits you and your goals.
Do you have an insight on a key stock, like Telstra or a bank? Many superannuation funds now allow you to buy actual shares. You don't have to hold your entire super in managed funds where a professional picks the stocks and enjoy the benefits of having direct control.
And you're not restricted to just Australian shares. There are a raft of other investment optons such as international share managed funds which could include companies such as Google, Apple and Microsoft. You could also consider a whole range of alternative assets including property, alternatives (including foreign currency and gold), fixed interest and cash. Depending on your superannuation structure you could also hold collectibles such as art work and vintage cars!
What if you're concerned about the impact some companies have on the environment? You can make a powerful statement and choose an ethical managed fund that screens out stocks that you think could be harming society and the planet.
"The more effort you put into superannuation, the more you study it and engage with it, the more you're likely to have a better outcome," Simon says.
For more tips on getting active with your super, visit our Super ‘next steps’ page.
1 Hon Bill Shorten MP, “Stronger Super – Government Response to the Super System Review (Cooper Review)”, issued 16/12/2010, strongersuper.treasury.gov.au.