7 ways to maximise your super (in a socially responsible way)
21 May 2018
Australians need around $545,000 to retire comfortably. Although this will differ depending on the lifestyle you want, adopting strategies to maximise your super will ensure you end up with enough. Here are some tips on how to do that—and be ethical about it!
Australians need around $545,000 to retire comfortably, according to the Association of Superannuation Funds of Australia's Retirement Standard. This amount will differ depending on the sort of lifestyle you want to lead in retirement. However, no matter how much you're aiming for, you'll need some strategies that will boost your super and ensure you'll retire with the amount you need to lead the life you want!
We've put together some expert tips on how to maximise your super—without compromising on your values.
1. Change your investment option
Your investment option can dictate the amount of superannuation you'll end up with when you retire. To get the best returns from your super, you need to think about the different investment options available and which one is most suitable for your stage of life.
Generally, the more conservative your investment option, the lower the returns you can expect. A growth option, which will typically invest a much larger portion in growth assets, has a higher level of risk but is also likely to generate higher returns. Changing your investment from a conservative option to a balanced or growth one could see you end up with much higher returns.
An age-based investment strategy is a great way to ensure that your investment option is aligned with your current situation. This means that your super fund will adjust your investment option over the course of your life. Generally, this involves taking on a higher level of risk when you're younger and have time to weather the ups and downs of investing, and a lower level of risk as you grow closer to retirement age.
By switching from a conservative investment option to a growth option, you may see higher long-term returns.
2. Check if you're eligible to get the government co-contribution
If you're a low or middle-income earner, you might be more concerned about having enough to retire on once you stop working. If this is the case, it's worth checking if you're eligible to receive the government co-contribution.
A government co-contribution is a boost of up to $500 (the exact amount will depend on your income and how much you contribute) that the government adds to your super savings when you make after-tax contributions.
3. Make additional contributions
Another great way to boost your super is to make additional contributions. Your employer should be contributing at least 9.5 per cent of your pre-tax earnings into your super fund, but you can do more!
Concessional contributions: Also known as salary sacrificing, these are contributions that come out of your pre-tax salary. You can set up a salary sacrifice agreement with your employer, whereby they'll forego part of your salary in exchange for additional super contributions.
Non-concessional contributions: These are after-tax contributions that you can make from your take-home pay in addition to your employer's contributions or any salary sacrificing. For more about contributions and how to maximise them, have a read of our handy guide to super contributions.
4. Look at the performance of your super fund
To make sure you have enough super when you stop working, it's vital that your super fund is performing in your favour. Not all super funds are the same, and some offer better returns than others.
Money magazine Australia found that a person whose super fund generated 5 per cent in returns each year would end up with $1,367 million (around $562,000 in today's dollars if we assume an annual inflation rate of 2.5 per cent). Comparatively, if your super fund generates 8 per cent in returns you could end up with $2,437 million (just over $1 million in today's dollars).
That's a big difference that shows how important returns really are. Switching super funds is straightforward, and will definitely pay off in the long term if you change to one offering higher returns.
How is your super fund performing in relation to others?
5. Start early
One of the biggest mistakes you can make is to start maximising your super too late in life. The earlier you start, the higher your returns are likely to be, thanks to the power of compound interest.
We know it's difficult to imagine retirement when you're in your twenties or thirties, but the sooner you start thinking about it, the better your financial future is likely to be! You'll have more time to grow your savings, and if you take a break from working due to illness or starting a family, it won't have as severe an impact if you've already built up a significant amount.
6. Invest in ethical industries
Now, of course you want to maximise your super so that you'll be able to live comfortably in your twilight years. But it's also important to think about where your super fund is investing. Are you investing in a fund that is giving great returns but supporting fossil fuels or weapons industries that harm the world's environment and populations? You want to look out for yourself, but you also want to look out for future generations.
Setting yourself up for a great retirement doesn't have to cost the earth. You can retire comfortably and without guilt by switching to a super fund that doesn't invest in industries like these. If you keep these tips in mind, you'll be setting yourself up for a retirement that you want—with the peace of mind that you're not causing harm to the environment in the process.
Want to find out more about maximising your superannuation? Reach out to Local Government Super today!
You might be interested in...
Could you be investing in tobacco without realising?
4 June 2018
Tobacco is the cause of over 7 million deaths every single year. Your super fund could be investing in companies that support the tobacco industry.
9 ways to be more sustainable in your everyday life
28 May 2018
How would you like to make a difference to our planet and start living more sustainably? From buying locally to saying goodbye to plastic bottles for good, here are our best sustainable living tips.
5 startling impacts the tobacco industry is having worldwide
11 June 2018
From exacerbating poverty to environmental degradation, we look at some of the most startling impacts so you can consider whether you want to invest in the tobacco industry—because your super fund could be.