5 questions you need to ask about superannuation

And find out if your fund is right for you  

A deserted island beach hut with never-ending cocktails. An around the world sight seeing trip. Towing a caravan around Australia without a set agenda. Owning the family home where the kids/grandkids come to visit…

No matter what your dream is for retirement, you want to make sure you’ve got enough money to be comfortable.

And that’s where your superannuation comes into play. You want to make sure you’re in the right fund that will help you achieve all your retirement goals.

1. What is superannuation?

To simplify it, superannuation is an investment structure with greater tax advantages than normal investments. It is intended to help fund your retirement and to ease the pressure on our government to give us an aged pension.

If you’re a Gen-Y or Millennial, you’re going to have compulsory superannuation for your entire working life. This (besides a mortgage if you get one) will be your biggest financial investment.

So, when it comes to superannuation, look at it as a tax-effective way to save for your retirement. Once you’ve retired and are over 60 years of age, your super is the only investment that will give you tax-free earnings and a tax-free income for life.

2. What superfunds are available?

So many! Here’s a rundown on each one:

Master Trust: A retail fund which is usually recommended and set up by a financial advisor. These are usually a tailored company or industry super fund such as Australian Super, CBUS or REST. They work as an umbrella structure where your investment is held by a trustee and all the fees and taxes are shared with other members.

Wrap: Another fund usually set up by a financial advisor which offers more investment types and options than a Master Trust. They offer direct equities, managed fund, term deposits, Exchange Traded Fund’s (ETFs), and other options. All investments are held in your name, and the fees and taxes are allocated to you, giving you some tax advantages when you decide to retire.

Your investments don’t need to be sold in the ‘accumulation environment’ (super) and then re-purchased when you move to the ‘retirement environment’ (pension) – they are simply transferred to save on costs.

Self-Managed Super Funds (SMSF): Also called the DIY fund, this type of fund is where investments are held directly in the name of your SMSF giving you more control (but also more responsibility). The members of the SMSF are the trustees, so you need to ‘police’ your super. You’ll need to do a yearly tax return and audit to make sure your fund is abiding by the superannuation rules and regulations. It’s common for people to purchase property through their SMSF as it’s possible also to borrow money using an SMSF. It’s recommended you have your accountant or financial advisor onboard to help you with all the regulations.

3. How is my superannuation invested?

Your superannuation is invested in 1 of 3 ways:

Pooled: All Master Trust super funds and a large portion of Wrap super funds are invested in pooled investments (or managed funds). This is where professional fund managers pool client’s money and invest on their behalf. The fund manager should be actively monitoring and moving the money around by buying and selling shares to try and outperform the market benchmark for its investors. In return, they charge a percentage fee of their money to manage the fund.

Direct: These are investments such as listed shares (e.g. Wesfarmers, Telstra and Macquarie), ETFs or direct property investments (residential or commercial). Shares and ETFs are commonly purchased in Wrap super funds of SMSFs, with direct property investments only being available in an SMSF.

Non-Mainstream: These are different investment types such as collectables, artworks and antiques. This form of investment is only seen in an SMSF.

4. When should I start thinking about superannuation?

Yesterday! Really – it’s never too early to start investing in your superannuation.

When you get your first job, it’s highly recommended that you set up your super right from the start. Here are a few things we’ve heard from our superannuation clients (who are looking at retirement!) over the years:

‘Is it too late to work on my super?’.

‘I wish I saw you in my 30’s and paid more attention to my super fund as I now see how important it is to give me the lifestyle I want in retirement’.

‘I wish I’d started to take more notice of my super when I was 20!’.

Seek the right advice from your financial advisor, get yourself into the right fund, and use it for every job you get over the years. It’s also a great idea to start making your contributions (no matter how small) to your superannuation fund with each pay.

Yes, it’s hard to think seriously about superannuation at the start of your working life – but think about your retirement and life after work!

5. How do I know which fund is right for me?

This is the million dollar question! There are so many superannuation options out there, and most of them are great. Doesn’t help much, does it?

What you need to consider is your situation. What are your retirement goals and what do you want to achieve in retirement?

For example, if you’ll own your home and are looking to live a quiet life, occasionally travelling and looking after your grandkids, your average fund may be suitable. However, if you’re wanting to be a jet-setter and living the high life, you’ll need a fund that will ensure you can do this.

It’s always best practice to chat to a financial advisor who can help you choose the fund most suited to you.

Want advice on your superannuation options?

As you can see, there’s so much to think about when it comes to superannuation. Before you try and sort it all out for yourself, make an appointment to speak to one of our financial advisors.

Tell us your dreams and let’s see how we can make that a retirement reality.

Email me at: [email protected]

Or call us on 03 9020 1888.