SIMPLE TRUTHS
Much is said about super, usually either negative or uninformative, making many people hesitate to engage with and optimise it as a personal asset. Most younger people tend to dismiss super as it relates to their long-term financial future. Yet most older people in the final stage of their career before retirement often wish they had made wiser decisions when they were younger.
The simple truth is that life happens, and most people will make mistakes. What is essential is to learn from the experience and adjust your situation accordingly to improve your circumstances.
Super is an area where mistakes and regrets are common, but when you better understand how super works and actively manage it, there is a significant opportunity to end up with an asset well beyond initial expectations.
VALUABLE ASSET
The introduction of compulsory super by Paul Keating back in the nineties is to be praised. However, over the years, there has been much interference and tinkering with new regulations regularly introduced. Despite the inefficiencies still associated with optimally managing super as a personal asset, the nation’s pool of super assets has grown to $3.85 trillion.
Super can be one of your most valuable assets for retirement, ultimately allowing you to fund your desired lifestyle in retirement. When commencing employment, your balance starts small. When managed effectively, it can quickly accumulate into a six-figure balance in about ten years, accelerating from there.
TECHNICAL SKILLS
While the technical skills you need to manage super effectively are hard to acquire, the decisions you need to make to optimise your balance (and thereby your projected income in retirement) become easy when you have access to appropriate information in the following areas:
- Product: Knowledge of all current super product options, including their functionality and value proposition in managing your asset at an individual account level.
- Fees and Costs: Understanding the cost structures within products based upon administration fees and insurance premiums and outside of super for premiums on standalone insurances.
- Contribution: Strategically using salary sacrifice to reduce personal income tax whilst boosting your super balance. A modest salary sacrifice over the long term has the potential to be more effective than making large amounts as you approach retirement.
- Investment: Undertaking an active investment strategy in investing your asset globally, consistent with market conditions covering asset allocation by geography and currency considerations.
Most individuals do not possess the specialised financial skills needed to generate this type of information. The acquisition of such skills would indeed be a full-time occupation.
For individuals who fall into this category, there are benefits to engaging with a financial professional who can offer valuable yet affordable super optimisation advice.
GOALS AND OBJECTIVES
Any significant asset needs active financial management. To effectively manage super, you need a target future goal of projected income in retirement (expressed in today’s dollars). Defined short-term milestones provide a measure to track progress towards set goals. Ongoing tactical updates are also necessary as circumstances and conditions dictate.
As you progress through your career, your circumstances change as your time horizon shortens and your balance accumulates. Early in your career, you chase growth and will therefore expose your super asset to shares and property. As you age and your super balance grows, a more defensive position is required (eventually), where a higher proportion of the asset is invested in cash and fixed interest.
To personally target super as a key source of income in retirement, you need some financial awareness of your investment portfolio and the rationale behind any investment advice and subsequent modification to your investment strategy. As a personal asset, it is better to manage super actively. This means making regular strategic adjustments based on ongoing 2-year market outlooks.
No matter your age, super is important. Failing to manage it appropriately can have significant financial consequences.
SUPER OPPORTUNITIES
There are always unknown surprise opportunities to optimise your super further that can arise with changes to legislation and regulations and when you get close to retirement. So, keeping up to date with available options is advisable.
Whenever your job circumstances change, such as getting a promotion or changing employer, always ensure you review your super strategy and recalibrate your goals and milestones. Later in life, you might want to go part-time as a halfway step towards full retirement. A transition to retirement strategy could become beneficial at this point.
Access to relevant information and specialist knowledge is essential to manage super optimally.
HELP IS AVAILABLE
Not knowing what to do with your super and when to do it results in missed opportunities, mistakes, and sub-optimal retirement outcomes.
Irrespective of who your super is with, SuperWiser is an online resource everyone can use to obtain affordable advice and services to optimise super.
Create your secure SuperWiser account using your email address and then follow the instructions on screen.
Alternatively, call 1800 467 467 to discuss your options.
PAY ATTENTION
There is much confusion around superannuation. No one knows what to believe, yet everyone must make decisions. The government’s direction on super appears to continually change. Occasionally, there is a clear directional signal, but the reaction from the public (who own the asset) is minimal or absent.
Everyone with a super account must understand that super is a personal asset, which means the responsibility for how well (or poorly) it performs as a wealth creation asset is down to them.
Ineffective management of your super asset can result in around 20% to 40% less income in retirement.
KEY DECISIONS
There are four key areas that impact super outcomes:
- Choice of Product
- Fees and Costs
- Contribution Strategy
- Investment Strategy
If you are to optimise your super asset these four areas require regular review and updates made at appropriate times.
Some additional points to note are:
- You must set super goals because you cannot manage what you do not measure.
- Use the measure of projected income in retirement to compare different super options.
- Monitor your progress regularly against defined short and medium-term milestones.
- Update your super strategy as your circumstances and market conditions evolve.
- Obtain appropriate information from a trusted source to make informed decisions.
- Periodically reset long-term goals and targets as (if managed effectively) results can trend above initial forecasts.
INFORMATION AND ADVICE
You may be wondering how to accumulate and maintain the financial knowledge needed to appropriately compare current options offered by the financial services market to optimise super as it requires a specialised skill set and analysis of up-to-date of relevant information.
The SuperWiser client portal fulfils this purpose specifically. It provides access to the information necessary to make informed, strategic decisions and advice around optimally managing your super as a personal wealth creation asset.
JUSTIFIED IMPORTANCE
For anyone unsure of the importance of super, a brief review of its history provides some perspective.
- Compulsory super started in 1992
- Initially, the employer contribution rate was 3% (as of 1 July 2024 is 11.5% and will increase to 12% on 1 July 2025).
- Due to the low employer contribution rate in the nineties, it took around 20 years for an employee to accumulate $100,000.
- If managed effectively, the significant increase in employer contribution rate nowadays means most employees in their 30s and 40s (currently) should accumulate an asset worth over $1m (in today’s dollars) by the time they retire.
- Individuals who manage their super ineffectively risk substantially under-realising its optimal value.
HELP IS AVAILABLE
Not knowing what to do with your super and when to do it results in missed opportunities, mistakes, and sub-optimal retirement outcomes.
Optimising your super asset requires effective management, which means setting goals, monitoring progress against milestone targets, and making timely, well-informed strategic decisions as required.
Use SuperWiser to complete a free super review. You can then make informed decisions and consider the cost benefit of obtaining formal super optimisation advice.
Create your secure SuperWiser account using your email address and then follow the instructions on screen.
Alternatively, call 1800 467 467 to discuss your options.
OPTIMAL OUTCOMES
Irrespective of your age, the quicker you realise the importance of your super and take appropriate action to optimise it, the more money you could have to spend in retirement.
Optimal super outcomes do not happen by accident, there are steps to take and informed decisions you must make. Choosing an appropriate super product is just one of them. Not all super products are created equal, and few (if any) product providers make optimising your individual super balance their number one priority.
Currently, two of the most popular personal super products are competing against each other to achieve $500 billion in accumulated assets under management between 2026 and 2030. The priority is to increase their size and market position but not necessarily to help you personally better manage your super to optimise your projected income in retirement.
Your super is your money, and it is naive to expect to achieve optimal financial outcomes from any of the standardised default MySuper strategies.
You must actively engage with your super, consider how much super you will need to live your desired lifestyle in retirement, understand what adjustments you can make to your super strategy to achieve your goal and make regular updates throughout your career as conditions dictate.
WHAT’S NOT SO SUPER ABOUT SUPER?
All super products offer a system of recording historical movements within individual super balances and provide an annual statement of account.
Fees and insurance premiums can vary from product to product. Investment strategies are critical to the success of every individual’s super balance. Unfortunately, the importance of investment appears to be downplayed by super products, the regulator and the government. Promotion generally focuses on the standardised default MySuper investment options, all of which fail to take account of imminent market conditions and most provide a result not genuinely explained.
In summary, there are two main components to managing super effectively as an individual wealth creation strategy:
- Selecting an appropriate super product to historically record your balance.
- Accessing strategic advice to help you optimally manage the growth of your super asset throughout your working life.
Generally, super products excel in recording your historical balance but are very weak in providing personal strategic super advice.
BEST INTENTIONS
Most people have good intentions but fall short of taking appropriate actions.
The options to optimise super outcomes have always been available but generally overlooked, and not clearly explained by super products.
Most people tend to want someone else to blame for their failure to make appropriate and timely strategic decisions to achieve the level of super necessary to provide a comfortable lifestyle for themselves in retirement.
Your super has tremendous possibilities when you pay attention to it. The consequences of not engaging appropriately with your super can be costly, potentially reducing the amount you could accumulate by around 40%.
There are essentially four areas requiring ongoing attention if your super is to be optimised:
- Product Choice
- Cost Control
- Contribution Strategy
- Active Investment Management
If you do not have the financial knowledge to manage the effective growth of your super to the point of retirement, engage with a service provider who can educate you appropriately or advise you on what to do every step of the way.
PRODUCT CHOICE
Superannuation products often change in ways that you don’t hear about. A new product that enters the market or a change in existing product design can make a difference to the value of your super asset.
Determining which super product is most appropriate for you is essential, and because super is quite technical, seeking advice from a knowledgeable resource can be highly beneficial.
The SuperWiser client portal contains a database of over 30 well-known super products, which is constantly updated to reflect product changes, be it fees, insurance, investment choice menu or other functionality, and its purpose is to assist individuals with making informed decisions around super.
COST CONTROL
Anytime you change employer, reviewing your super fee structure is highly recommended.
Employers can often negotiate lower costs and insurance premiums for workers who join the employer super plan, so if you have not taken the time to compare your existing super product against the super plan offered by your employer, it is worth investigating.
You can complete a free super review using SuperWiser.
CONTRIBUTION STRATEGY
Every year or so, the government might change concessional and non-concessional caps, and it can be easy to miss opportunities if you are not paying attention to the impact of your contributions.
Once registered on SuperWiser, you will receive notifications of any change that might benefit your efforts to optimise your super balance.
ACTIVE INVESTMENT MANAGEMENT
MySuper is a default investment strategy, not an optimisation strategy (there is a difference).
There are three basic MySuper designs, and each one has deficiencies:
- A fixed design is generally a balanced portfolio, which means it is underexposed to growth assets for younger employees and overexposed to growth assets for older employees with a shorter time horizon before they access their super in retirement.
- A glide path design is where the bulk of your super asset gets invested in a growth (not high growth) portfolio, with future contributions invested conservatively somewhere in your fifties. This lack of attention to detail around investing means your asset is not optimised and is seriously over-exposed to growth assets, especially if imminent markets look precarious.
- Life cycle defaults are somewhat more sophisticated than glide paths, with age as the only de-risking factor considered.
SuperWiser helps you actively review and update your investment strategy every 12 to 24 months to ensure the right balance of growth and defensive assets reflective of market conditions expected for the cycle.
HELP IS AVAILABLE
The SuperWiser client portal provides access to affordable, expert advice and service specifically focused on assisting you to manage your super towards an optimal outcome.
WHY NOT GIVE SUPERWISER A TRY?
Create a secure account using your email address and complete the free super review.
FORWARD PLANNING
Forward planning always begins with assessing your past. We all have aspects of life we know we manage well and some that we could manage better.
Unless we regularly take stock of our current situation, review what we have done to get to this point and determine how we can improve our future outcomes, we stagnate and miss out on beneficial opportunities. Super is an area where this is especially true.
MONEY MANAGEMENT
There is more to life than money, and becoming a multi-millionaire may not be our life purpose, but if you do not manage your financial affairs wisely, life can be more difficult than it needs to be.
Learning how to manage/mismanage money usually starts when you obtain a job that provides a steady income. It is financially wise to use earnings to buy an asset that appreciates rather than depreciates, yet most people tend to look for a car first, which is an asset but one that is worth less in the first week of ownership than what you paid for it.
Most people take a decade or more to develop a financially sound perspective on their cash flow, savings and acquisition of assets, and many opportunities to improve their circumstances during this time inadvertently fall by the wayside simply due to unawareness
FINANCIAL AWARENESS
Phrases such as financial education or financial wisdom are popular phrases often heard in different situations within Australia. People develop different levels of financial awareness depending on what they are responsible for.
Various levels of government play a role in the management of the Australian economy and initiate a range of priorities that do not benefit all but do benefit some. The segment of corporate Australia, be it large or small businesses, and the impact of decisions made around the national economy requires consideration, and so does the family unit or the individual trying to struggle upward through parenting efforts and then future generations.
If we all are to move forward and upwards in life, financial awareness is as much a necessity as care for your community, with the balance between both finely judged by someone or a body who has both financial wisdom and skills.
REFLECT AND REVIEW
Financially, what you do not do will always come back to haunt you. How many times in life will you be able to start again? The answer to that question depends on your age and the time available within your life horizon.
Effective management of your financial situation demands you base decisions that impact your future on knowledge acquired from reviewing your past.
Decisions made and implemented without adequate information are almost always wrong. An opinion backed up with the acquisition of evidence equates to fact-based knowledge. Making informed decisions increases the probability of achieving life goals.
SITUATIONAL ANALYSIS
Earn some money through employment, spend some or even all you earn, maybe save some before you spend that too, and accumulate an abundance of debt. The summary of life for too many well-intentioned individuals.
If this is the treadmill you are on, the first step in taking control of money is always to analyse the situation as it is. It is easy to make financial mistakes without even knowing you are making them, many of which are damaging in some way or other.
Growth (whether personal or financial) requires you to acknowledge what you do not know, analyse the positives and negatives of the current situation and create an improved pathway forward.
DECISION MAKING
Having developed and even documented a new or heavily modified perspective around the management of your income, savings, assets and liabilities, changes in behaviour will need to be adopted involving the rules you want to operate to and the goals you want to set for yourself and others who might be somewhat dependent on you.
Your future financial outcomes depend upon you knowing what you are doing, a process that requires considered steps in deciding what to do from here and engaging the services of a trusted professional who can answer your questions and help you make fully informed decisions can be beneficial.
CAREER DEVELOPMENT
Most people earn income plus super from employment, yet many do not actively develop their careers sensibly. It is critical to the development of your future financial situation that you succeed within your chosen line of employment.
Nowadays, every employee in their thirties will have accumulated $100,000 plus in super, a personal asset that likely would have already been spent if paid out as wages.
Very few people endeavour to adopt the right wealth creation strategies with their super, displaying a lack of financial awareness that arguably pervades the overall management of their money.
GET STARTED
Do not let any further opportunities to create more wealth for yourself pass you by. Set the intention to become more aware and develop financial management skills in 2024.
To attend a free financial awareness webinar email yoursuper@superwise.com.au
Or visit www.superwiser.com.au and complete a free super review.