Knowing how superannuation works is your secret weapon for financial success.
As you approach retirement, or even if it still feels a long way off, understanding your superannuation is one of the smartest financial moves you can make. After all, your super is likely to be your primary income source once you stop working, so the more you know, the better prepared you’ll be for the future. Here’s why taking the time to understand your super can make a real difference in the life you’ll be able to live down the track.
1. Your Money, Your Future
Super is essentially your money – it’s not some abstract government scheme but a part of your income that’s saved on your behalf. Every dollar in your super fund is there to support your lifestyle in retirement, and every choice you make around it has an impact. From investment options to fees, understanding what’s going on with your super gives you control over your financial future. It’s worth checking your account regularly and looking at your statements. Simple steps like reviewing your contributions and making sure your super fund aligns with your values and goals can yield big rewards.
2. Fees Can Make a Big Difference
It’s not uncommon for people to overlook fees when it comes to their super. After all, it’s not like you’re writing a cheque each month to cover them – they’re quietly deducted, often unnoticed. But here’s the thing: super fees can add up significantly over time and have a direct impact on how much you’ll end up with. Imagine paying an extra 1% in fees each year – over decades, that can cost you thousands. Take a close look at your fund’s fee structure and consider whether switching to a lower-fee option could benefit you in the long run.
3. Investment Options Are in Your Hands
When you think of investing, you might imagine needing a brokerage account or getting into real estate. But your super fund is already an investment vehicle, and it’s one you can tailor to suit your preferences. Super funds usually offer a range of investment options, from conservative to high-growth. Knowing your own risk tolerance and how far you are from retirement can help guide you to the best choice. If you’re younger and have decades to go, a growth-oriented option could work well, but if you’re closer to retirement, a balanced or conservative approach might feel safer.
4. Maximising Your Contributions Can Pay Off
Understanding how contributions work can be a game changer. Apart from the compulsory employer contributions, you have options to add more into your super through salary sacrifice or personal contributions. Even small extra amounts added consistently over the years can have a powerful compounding effect. For example, if you’re able to salary-sacrifice a portion of your income each pay cycle, you’ll not only be growing your super faster but potentially lowering your tax bill. And for anyone nearing retirement age, there are also specific government incentives and tax breaks that can further boost your super balance.
5. Insurance and Super Go Hand in Hand
One aspect many people overlook is that most super funds offer insurance, covering things like life insurance, total and permanent disability (TPD), and income protection. While this can be valuable protection, it’s worth checking how much you’re actually covered for and whether it aligns with your needs. If you’re paying for insurance through your super that doesn’t align with your personal circumstances, you could be losing money. On the other hand, it might be cheaper to keep these insurances within your super than to seek them independently, depending on your needs and goals.
6. The More You Know, the Better Decisions You Can Make
The simple truth is, superannuation is a complex area, and the more you know about it, the better equipped you’ll be to make choices that support the future you want. While you don’t need to become an expert, getting a basic understanding of key aspects, like contributions, investment options, and fees, can make a huge difference. There are resources available online, including on your super fund’s website, that can help you understand the basics.
For a deeper dive, many super funds offer member education sessions and financial advice services. Checking with your fund or looking into resources like MoneySmart can help you gain confidence and clarity. Don’t leave it to chance – your super is one of the biggest assets you have, so make the most of it.
The Bottom Line
Understanding your super isn’t just about numbers; it’s about empowering yourself with knowledge. It’s about planning to give yourself the freedom to live the life you want after working hard for years. And it’s never too late to start. Whether you’re close to retirement or just beginning to think about it, taking control of your super is one of the best ways to ensure you’re financially prepared for whatever lies ahead.
And as you enter your silver years, here are The Five Best Things to Know About Money When You’re Over 50. And for more love tips, here is our guide for How to Think About Money in New Relationships over 50.
