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Bruce Brammall, The West Australian, 30 October 2017
It can be a headache of super proportions. And once thought about is something too many banish from their minds.
“What should I do to make my super really work for me?”
In recent weeks, you have probably received your annual super fund statements. Most will open them, note a bit of growth since last year, then “file” them. Some will stuff the unopened envelope into a drawer to make friends with all the other unopened super statements from the last decade.
“Some contributions went in. It grew a bit. What else do I need to know?”
This is an acceptable response … if you’re young and accept that you’re an idiot who deserves to retire on baked beans and dog food.
For everyone else … understand the following.
Super is your money. (You just can’t get your hands on it yet.) It represents the quality of your retirement. The more of it there is, the more pleasant your retirement should be.
For most, it will be your main means of financial support one day. And will be far more reliable than your children in taking care of you.
Sure, if you’re under 45, the balance now might be less than a year or two’s salary. But when you’ve more grey hairs, it’ll probably be the biggest asset you have outside your home. Possibly even your biggest asset.
I can almost guarantee that, at some point, you’re going to wish you’d paid more attention to it earlier in life.
The good news is … little fragments of time spent now, making relatively small changes, could help to double your super at retirement. That can be the difference between holidaying in a caravan park and spending it travelling the world, or perhaps buying the caravan park.
So, go and get your super statements. All of them. How many have you got?
Grab a pen and paper. Then take down the details, for every super fund, of the following.
Here’s what you’re looking for.
- What insurances are in each super fund? This is critical.
- What is each fund’s balance?
- What are the overall, non-insurance, fees?
- What are the insurance fees?
- Now, how did the fund perform from a returns perspective?
That’s roughly the order of importance. The performance will, largely, be a factor of how aggressively the fund is invested.
If you’ve got more than one fund and are considering consolidation, the insurance questions are paramount. Insurance that is already in place cannot easily be altered by the insurer.
If you’re perfectly healthy, then you might be able to get good insurance elsewhere.
However, if you have had issues that might lead to an insurer giving you an exclusion for that health condition (bad back, mental health, for example), or will make you pay more for your insurance (known as a loading), then you will want to consider keeping those insurances.
I know it goes against the “consolidation” story sold by so many with perhaps as much as half a brain, but honestly, a fund with insurance coverage is far more valuable than a fund without insurance, if you have any health issues and have a partner and kids to support.
Let’s take Jimbo. Jimbo is 38, married with two kids and has five super funds. He’s done a few things in his life, but he’s currently a labourer.
While the money labouring has been great, he has spent time with a chiropractor to deal with work-related back issues in recent years.
Of those five super funds, three have insurance.
He’s probably going to want to keep those three funds. Getting new insurance while a labourer is going to be expensive (higher risk category) and because of the work with the chiro, he’ll cop a back exclusion on new insurances.
For the young, start to look at fees and performance after considering your needs for insurance and your current coverage.
Next comes how much investment control you want. Most super funds will now give you a broad range of investment options. If you want to pick your own shares and your current fund doesn’t allow that, then don’t throw away your insurances to do that.
If it’s all too confusing, don’t despair. But don’t think that doing nothing is an option.
Get quality help. Good financial advisers are the paracetemol that can treat this headache.
Bruce Brammall is the author of Mortgages Made Easy and is both a financial advisor and mortgage broker. E: bruce@brucebrammallfinancial.com.au.