If you think your superannuation is something you don’t have to think about until you’re fifty-something or a few years out from retirement, think again.
It’s the one investment that all working Aussies have – and the performance of your super fund you’re with will make a big difference to your nest egg when you retire.
Here are five misconceptions about your superannuation you need to know about:
1. It’s hard to break up with your super fund
Nope – that’s not true. Most super funds have been investing heavily in technology, including making more user-friendly websites and apps. You can sign up to a new super fund in minutes and get your former super account transferred to your new one – all online.
It’s important to know whether your super fund is performing well. Roll-it Super founder Mark MacLeod likened superannuation to marriage.
“If your fund is underperforming, you may have accidentally married a loser and you’ll only be staying in the hope that one day they will change,” he said. “Like it or not, you are married to your super fund until you retire – so ask yourself, are they under-performing and could I do better?
“Divorcing your super fund sounds difficult, but it is easier than you think. Keep in mind, you don’t have kids with your super fund, and your next fund will probably be much better looking.”
2. Without a doubt, your super fund has your best interests at heart
Some super funds are better-performing than others – and it’s also true that it’s in some super funds’ best interests to keep you as a member.
“The superannuation industry wants you to remain comfortable with being disengaged and passive about your super as that means you will never challenge fees or performance and you won’t leave,” MacLeod argued.
“A healthy relationship to have with your super fund is that of a savvy, demanding consumer at the boxing day sales. Become a tough customer who demands lower fees and higher performance. Shop around until you find the super fund who gives you what you deserve.”
3. Your employer will take care of your super
Many Aussies that start their very first job end up joining the default super fund chosen by their employer. You didn’t give much thought to it at the time, and probably not all that much thought after that point either.
“You just allowed your employer to make the most important financial decision of your life,” MacLeod pointed out.
“You just passively accepted that your employer, who is probably completely unqualified to recommend financial products, will a critical financial decision for you.” Do your research and make your choice of super fund a conscious, well-informed decision.
4. You can totally run a self-managed super fund
Even the most seasoned finance professionals will need the help of a small team of financial advisers, legal professionals and accounts to manage their so-called ‘self-managed’ super fund (SMSF).
On top of that, there’s a hefty laundry list of things you need to do to set it up – not to mention the manpower, cost, time and paperwork involved.
Still think you can run your own super fund? Here’s what it takes.
5. Superannuation and insurance have nothing to do with each other
Also not true; most superannuation investment options have insurance cover. But the type of cover will vary. When you join your employer’s default fund, you’ll automatically get Life and Total and Permanent Disability (TPD) insurance unless you opt out.
If you switch, you’ll also have to consider what kind of life insurance you need. Do you need it at all?
“If you do, make sure you are eligible to receive the super fund insurance (before you cancel any policy you might have with another super fund) and that you know what you will be covered for before you opt-in,” MacLeod said.
“For example, some life insurance policies through superannuation do not cover sole traders, while others exclude or include steep premium loadings for manual and hazardous jobs.”
The moral of the story here is: do your research and ask questions.
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