We’re talking about following five strategies for boosting your superannuation returns… and controlling your financial destiny.
One important factor when you start to plan your retirement is making sure that you compare your super fund to an industry fund. The reason why this is important is because modelling by superannuation analysis company SuperRatings shows industry fund members were likely to retire with $118,476 more than retail fund members. This is generally because of the compound effect of large fees. If you don’t compare pension / super fund charges and returns, then you run the risk of being left with not enough funds for retirement.
Another important consideration for planning your retirement is where you buy your super fund or retirement account. You may not realise that all of the major financial planning groups in Australia do not recommend industry funds. This is because industry funds do not pay commissions to financial planners. So how can you ensure you are comparing apples with apples?
Compare online with SuperRatings.com.au or do your own comparative research. If you make sure you have checked the projections of your super nest egg with more than one website, then you’ll be fine.
ASIC’s MoneySmart (the regulator) is the best place for comparing different funds and also has Super calculators. You can even use calculators to decide whether to put extra funds in your mortgage or into super.
You don’t even have to give up good returns in order to invest through an industry fund. With my own industry fund, I manage it actively allocating to the higher growth areas and because of this it grows at about 10% annually. It certainly pays to be sure you are in the best performing fund long term.
One note I would like to add is: some people think that the Fund Manager is paid for picking out your asset allocation for you. The fund manager’s job is to invest its various pools into the best performing equities, listed property, fixed interest it can, and then make a commission on the fees. Your job – if you don’t speak to a financial planner – is to ensure that the Super Fund allocation you have reflects your RISK to RETURN ratio, i.e. you know the risks and you know how long you have until retirement to make up for those negative times.
Someone with a short time until retirement should be more conservative with their choices than someone with a 40-year working life left.
Instead of setting back your retirement planning efforts by listening to financial spruikers and financial planners (each with their own agenda), try researching various basic types of investing yourself and take small steps in the right direction. In fact, the more you learn, the less fear you will have of making a mistake.
Conversely, the more fear people have of managing their own finances and investments, the more likely they are to be taken in by high-fee-charging, risky ventures, e.g. high-lend margin loans and mortgage-backed debentures. Never be scared to ask what the various fees are and what the expected performance of the fund is.
If you have a sizeable account already (over $200,000), have you considered setting up a Self Managed Super Fund, perhaps with other adult family members? It’s not as difficult as you might think. The rules are more flexible than they once were, although there is still plenty of administration involved. What you need to do is contact an accountant or solicitor to set up the trust deed. Then either research assets yourself or find a trustworthy financial adviser to help with your investment choices.
You might do better than the indices if you choose high yielding mid to large companies with solid fundamentals, inside a diversified risk portfolio. The costs of maintaining an SMSF ($1200-1500 per year) makes it worthwhile for the larger funds, IF you consistently monitor the performance and protect your assets.
Many Australians are now containing much of their wealth inside their Super fund, because of the low tax environment. So if you really want to retire early, read my book, and follow these tips to make money all on your own.