The fact that people can’t access their superannuation until they retire, results in many not treating it with the respect it deserves. Superannuation is real money!
The introduction of compulsory super, decades ago, is seeing superannuation become most people’s second biggest asset behind the family home. Actually, is not unusual for it to be our most valuable asset; despite this, most people don’t treat it as such.
People not knowing how many superfunds they have and/or where they are invested is so common that I’m no longer surprised. I’ve heard clients say, “it’s only a few thousand dollars, I can’t be bothered”, so many times that I accept this as normal. It is not normal. If we had a few thousand dollars anywhere else, we would certainly be bothered.
Recently, I discovered that a client’s last five years of super contributions have not been received by his fund. The client had no idea that around $40,000 of his money had not been deposited into his account. The lethargy that comes with superannuation is really hurting us in the long run.
It is important that we view super as we would every other asset. We need to ensure that we know what fund we are in, how much we have, how much we are paying in fees and how it is invested.
In most cases, you would like to have a single fund that is fit for your circumstances (unless you have a strategic reason to hold multiple funds). There are many good funds and there is no magic, one-size-fits-all solution. The important factor is, selecting a fund that suits your circumstances. If you have a single appropriate fund, it is far easier to track progress.
The fees associated with superannuation funds are wide-ranging, particularly with older products that are far more expensive than more modern funds. Cheaper does not necessarily mean better however, you do not want to be paying additional fees with no additional benefits. The really expensive funds are typically older funds that generally offer less and charge more. Also, simply having an industry fund does not mean you have a low-cost fund. All industry funds are not equal; some are high quality and cost effective, others are not cheap at all and are limited in their offering.
The area where most people let themselves down is when they have no investment strategy whatsoever when it comes to their super. Superannuation is merely a tax structure; you are able to invest in any way you choose. You should look to invest in a manner which suits your circumstances. The long-term nature of super lends itself towards aggressive investing; however, it also has to suit your natural risk tolerance.
Almost ten percent of all our earnings is automatically invested into super, yet many people almost completely ignore it. We need to treat superannuation like real money; how we act now will greatly impact our retirement.