Money matters with Ellis
Your 7-step super checklist Thank goodness it’s August – just one month until spring! This is also when your annual superannuation statement should arrive and it’s definitely worth a look.
To be sure you cover all the essentials, follow this 7-point checklist to see if your super is on track to meet all your retirement goals.
1. Your super balance
Do your super savings point to a comfortable retirement? Or could you do with a bit extra?
One way to find out is the online Super Balance Detective on the SuperGuru website. You just enter your date of birth, and the calculator shows how much you need in super today to reach the ASFA Comfortable Standard balance by age 67. For instance, it shows that a 35-year-old should currently have about $93,000 in super.
An alternative is to jump onto the Retirement Planner on the MoneySmart website. It shows your likely income in retirement based on your super balance plus any
Age Pension payments.
No matter which option you use, if your balance seems a little lean, it’s never too late to grow your super through salary sacrifice, voluntary contributions or government cocontributions if you’re a low to middle income earner.
2. Contributions paid to your account
Over the 2021-22 financial year, employer super contributions were set at 10% of your base wage or salary. It’s important to check the boss made these contributions, though the payments won’t always match your regular pay days. Employer contributions can be paid quarterly at the end of October, January, April and July.
If it looks like a few payments are missing, have a chat with your boss. If you’re not happy with their response, you can report unpaid super contributions to the Australian Taxation Office (ATO).
3. The fees you’re paying
All super funds charge fees – that’s how they make money. However, fees vary widely between funds, and it’s important to know what you are paying because high fees will eat away at your retirement nest egg.
The fees noted on your super statement can appear small in dollar terms. To get a clearer picture, it’s handy to see what the fees come to as a percentage of your balance.
To do this, take the total fee amount, divide it by your balance, and multiply it by 100. So, if you paid say, $1200 in fees and your balance is $120,000, your fees come to 1.0%. That’s about what many experts say you should be paying. Use the table right to see how your fund shapes up for fees.
4. Your fund’s investment returns
This is the favourite part of my super statement – seeing how much my money earned! The returns on your super will depend on the investment option you selected. Most Australians have their super in a ‘balanced’ option. As the table below shows, average 1-year returns on a balanced fund are about 7.22%.
5. Your insurance cover
Many of us have insurance through our super. Check how much cover you have in place, and if it seems too low or high, you can ask your fund to adjust it. This can impact your final nest egg as premiums are paid out of your super savings.
6. How your money is invested
As I noted, most Australians have their super invested in a balanced option. However, you are usually free to change this. Selecting a ‘growth’ option will mean a bigger chunk of your super is invested in shares.
This offers the potential to earn higher returns over time, though your returns can also jump around a lot more from year to year.
If you’re unsure about the right option for you, consider getting advice from your super fund or an independent adviser.
7. Your beneficiaries
Your annual super statement will show who you’ve nominated to inherit your super and insurance if you die. Check the names listed are still correct – you can change them by contacting your fund. After all, you probably don’t want your ex to inherit your super.
For certainty around who your super goes to, it’s worth completing a binding nomination. Your super fund can provide the paperwork for you to fill out.
“Don’t be surprised by any lacklustre performances, as the investment market is very challenging at present.”