DIY Super Health Check
Super can be boring, I get it and am not here to convince you otherwise.
I also understand why it is hard to get excited about it as ultimately it seems years away until we can access it. But I believe in taking some small steps now to set up super correctly, so you don’t need to actively review it all the time.
Most of us will rely predominantly on our super for funding retirement, so in order to maximise your end-balance, it is worth spending the time now to ensure it’s working for you and not for someone else.
So do yourself a favour, invest some time now and future you will thank you for planting the small tree, as it will likely have grown into a very large tree over the long-term.
Liken this process to “improving the soil, fertilising the tree and placing it in an optimal sun position” (DIY health check), so you only have to “water it annually” (review it).
The below DIY health check is a simple 5 step process which if followed, will more than pay for itself in the future, in terms of time you spend now attending to these matters vs your balance at retirement.
1. Consider consolidation of superannuation
Refers to simply not maintaining more than one superannuation fund, with the purpose of avoiding duplication of fees and insurance premiums which eat away at the balance.
This can be done in one of two ways, firstly your preferred/chosen super fund can assist you with consolidation as long as you have your other Super Fund details. Alternatively, via your MyGov account, linked to the Australian Taxation Office’s (ATO) online services – you can easily view ALL of your super funds and perform a consolidation.
Before you do this, you should conduct research in this space, to help choose the best super fund for you. This is something an Adviser can assist you with, but in my opinion is an area with plenty of resources online to assist, one option is https://www.canstar.com.au/superannuation/
It is important that you complete steps 2 to 5 in the DIY health check prior to consolidating your super funds, as these will cover other areas that you should consider in the process of selecting your chosen fund.
2. Compare the long-term performance
Ensuring that your chosen super fund performs well is crucial, as this has such a large impact on your accumulation rate and final balance.
Your chosen fund will invest your regular contributions and it is important to know that they have good, long-term track records of performance compared against peers.
The difficulty here is that investment returns vary from fund to fund, however this is why the Government has created https://www.ato.gov.au/YourSuper-comparison-tool/ to provide a trusted comparison service.
The nature of super investing generally is long-term, so comparing the above over longer timeframes, such as a 10-year period, may provide a better idea of how well your fund is positioned.
A caveat to that, investments go up and down over time, therefore strong past performance isn’t necessarily indicative of good returns in the future. This is why the next steps of the DIY health check are equally important considerations.
3. Review the TOTAL fees
We all get charged a range of fees by our super funds in return for managing our money.
Whilst it might not look like a massive amount, but over time fees can eat away at your balance and limit the amount of money that’s earning investment returns for you.
It is worth shopping around (using Canstar & ATO comparison tools) for a fund that has a combination of low fees and good returns.
As a general guide to knowing how much is too much, the ballpark figure you could aim for is total fees being under 1% of your balance, in total per year.
4. Check your insurance
Most super funds will offer some level of default insurance cover, and this can be a cost-effective way of holding insurance to protect yourself and your family.
Admittedly, insurance is one of the more difficult areas in terms of knowing what exactly you’re covered for, as well as if this is enough and in what events will a payout be made. The best direction here would be to speak to your super fund insurance department and have this conversation directly.
The most important consideration prior to implementing Step 1 is to consider your existing insurance cover and make sure you can get similar cover with your new fund. This is crucial if you’re over 40 and/or have a pre-existing medical condition.
5. Have you got a Beneficiary nominated?
Now, by this stage you would have come through and started formulating the basis for the above decisions in Steps 1-4.
This last step, whilst not likely to have any impact on the growth of your super, is arguably the most important to ensure that upon your (member’s) death that your super plus any insurance payout proceeds go to the correct person(s).
It is not widely known that your super doesn’t automatically form part of your estate (Will) and can’t just be included in your Will – instead each super fund will prompt you to make a “Beneficiary Nomination” to cover this.
Please do not neglect this step…. It takes under 5 minutes to fill out the typical nomination form and will save everyone the confusion and headaches!
Jayden Allison CFP®
MFinPlan, BCom (Eco&Fin), Dip. FS (FP)
General Advice disclaimer
The general/factual information provided was done so without taking into account your personal objectives, financial situation or needs; you should consider the appropriateness of the general/factual information, in light of your own objectives, financial situation or needs, before following or relying on the general/factual information; if the general/factual information relates to the acquisition or possible acquisition of a particular financial product, then you should obtain a copy of, and consider, the Product Disclosure Statement (PDS) for that product before making any decision.