When it comes to your superannuation, even a small mistake could cost you a fortune in the long run.
From failing to consolidate your accounts, to losing insurance coverage, or even switching preferences in fear of an S&P/ASX 200 Index (ASX: XJO) market crash, there are many different superannuation mistakes which could damage your retirement balance.
But there is one in particular which is rife with Aussies in their 40s. And the worrying thing is, we're probably all guilty of it.
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The $100,000 superannuation mistake
The biggest superannuation mistake that many Australians make in their 40s is to leave their super on autopilot.
That means, failing to start or increase your contributions, failing to review your superfund performance, or failing to adjust your super risk profile to suit you as an individual.
This is because your 40s are generally an age bracket when salaries are likely to rise, promotions are on the table, and parents are able to return to some type of work.
By leaving your superannuation on autopilot, what might be a $5 loss today could easily snowball into $100,000 by retirement after you take compound growth into account.
What do I need to action now?
To avoid this, you simply need to take action. Here are a few pointers to get started:
1. Make sure your superfund is performing
Is your superfund underperforming or in line with market expectations? One of the worst superannuation mistakes you can make is to stick with a poorly performing fund. The difference between an average superannuation fund and a top-performing one can be the difference between scraping by in retirement and living comfortably.
2. Review your risk profile
Do you have the default superfund investment option? Putting your money into the wrong type of fund can quickly chip away at your balance. It makes sense to be conservative later on in life when you're approaching retirement and you're planning to access your funds in the next few years. But by being too conservative too early you'll lose out on the potential for more growth.
3. Add extra when you can
There's no sense adding money to your superannuation fund if it means you'll struggle to make it to payday. But if you do have spare cash at the end of the month, it pays in the long run to contribute it to your superfund. The power of compounding returns means that the more money you can invest when you're younger, the more impact it will have on your final balance.
