It is easy, with a long-term investment like superannuation, to "set and forget" and just assume it's working as it should.
It is a dangerous trap to fall into, however, and the impact can be large.
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Compound interest impacts can be large
Some superannuation funds are perennial underperformers, and if you're stuck in one of those, you'll be leaving a lot on the table.
As an example, just a 0.5% difference in performance can have a large effect.
If you invest $100,000 for 20 years at a 5% rate of return, you'll end up with $265,330.
But if you add just 0.5% to that rate of return, you end up with $291,776 over the same period.
So how do you perform your own superannuation health check?
The easiest way to do this is to use the Federal Government's YourSuper comparison tool, which can be found on the Australian Taxation Office website.
As the website explains:
The YourSuper comparison tool helps you compare super funds based on their performance. You can access a personalised version or a non-personalised version of the tool. The advantage of using the personalised version via myGov is we show you what your existing super accounts are and you can compare those with others in the tool.
The comparison tool displays a table of MySuper products which are ranked by net returns, updated quarterly, as well as the fees charged by funds.
MySuper products are the default investment option that people are placed into if they don't choose their own investment option when setting up a fund.
The comparison tool allows you to select up to four superannuation products at a time and will show you the past net returns for three, five, and 10 years, the investment strategy, and the total annual fees.
Check the details of your investments
Beyond confirming that your superannuation fund is performing adequately, it's also worth assessing whether your investment settings are suitable.
Most funds offer options such as balanced, growth, and high growth, which may be more or less appropriate depending on your risk tolerance, age, and the outlook for the global economy.
The guidance of a financial planner can be helpful in deciding which setting is right for you.
And finally, it's always good to ensure you are not running more than one superannuation fund at one time, and thereby paying management fees on each.
It's easy, particularly while young, to accrue more than one fund, but a simple search of your myGov account can tell you whether you have more than one fund in operation, and they're fairly easy to roll into one.
