Unfortunately, too many Australians don't even think about their superannuation at all, let alone actively choose the best superannuation fund for their needs. After all, if it's out of sight, it's usually out of mind. But super is still your hard-earned money, even if the government locks it away until your golden years. Even better, super money is taxed less on entry (up to a point) and (usually) tax-free when withdrawn. You don't get many free kicks in the financial world when it comes to tax, but that's a big one.
So it's important to make sure you're getting the best bang for your buck when deciding where your super is sitting. Here are three simple tips to help you get the most out of your super.
1. Make sure you're not paying high fees
This is a big one. We heard in the Royal Commission last year how many super retail funds were charging high range fees but delivering below average returns for their members. I'm not saying that retail funds are worse than industry funds or others, but the first thing you should be looking at with a super fund is the fees you are being charged – a high fee can rob you of tens of thousands of dollars over many years, due to lost compound interest.
2. Choose a cheaper investment strategy
Most super funds offer 'active' strategies where their investment managers will manage an active portfolio of different investments by default. While some managers can deliver consistent outperformance, for many it might be cheaper to choose an 'index' fund that just tracks market-wide exchange-traded funds rather than the 'Balanced' or 'High-Growth' active options. These will generally be far cheaper than the default options, but offer similar or higher returns – make sure to check with your super fund to see if they offer this product.
3. Make the right investment choice for your age
Most people get placed in the 'Balanced' fund as a default, where growth assets like shares are balanced with defensive assets like bonds and cash. However, for anyone under 40, a 'High-Growth' or indexed option might be a far better choice, considering you don't have to worry about capital preservation in a market crash and have plenty of time left working to take advantage of the cheaper prices a crash will bring. Growth options are riskier, but you trade this off with higher returns, so make sure you're making the best choice for your age and circumstances.
Foolish takeaway
Of course, none of this is meant as a personal recommendation, and you should always check with a financial advisor for advice about the best choice for you. But by making some simple enquiries, you could be saving yourself tens or hundreds of thousands of dollars over a working lifetime.
