Rachel Hamlen outlines five ways you can get super savvy for Ladies Finance Club.
1. Understand the basics
Let’s start by ensuring you have a firm grasp of the fundamentals. The Superannuation Guarantee is legal requirement where Australian businesses have to pay at least 9.5% of your wages into your nominated super fund. That means the more money you make, the more super you earn. Of course, the flip side is that if you don’t work, or earn less than $450 a month from your employer, you don’t receive any superannuation. Your super fund invests that money on your behalf, and the magic of compounding returns means that the fund grows exponentially the longer you leave it in. Also, not all super funds are created equal. Super funds will differ on the fees charged, the return (which is the amount of interest earned on your super balance), the investment options, insurance coverage and additional features that make your super fund more accessible.
2. Find a super fund that best suits your needs
It’s important to find a super fund that matches your specific requirements and lifestyle. This won’t be the same solution for everyone. The innovative savings tools built into FairVine Super, for example, make it a great option for women who want an easy way to catch up on their super contributions. It is designed to reduce the reliance women have on employer contributions, with innovative savings tools like RoundUps, FairRewards and FairShare that enable members to grow their retirement savings independently of their employment status.
3. Consolidate all of your super funds into your chosen fund
If you’ve worked at a few different companies, chances are that you’ve accumulated more than one super fund. The problem with having multiple super funds is that you’re also paying multiple sets of fees and multiple premiums for insurance products attached to each fund. These charges can quickly erode the balance of your super fund, and if you don’t have much money in the fund to begin with, it’s not uncommon for the balance to be whittled down to zero.
Most funds will enable you to rollover all of your active super funds to that fund, so check with them on the best way to initiate that process.
“...not all super funds are created equal.”
4. Figure out how much you need to retire comfortably
According to The Association of Superannuation Funds of Australia (ASFA), single people will need to have $545,000 in retirement savings, and a couple will need to have $640,000, in order to have a ‘comfortable retirement’. However, this number assumes you own your home. Further, your definition of comfortable may be different to ASFA’s. At the end of the day, the lifestyle you want to have when you retire will dictate the magic number you will need to reach in your superannuation.
5. Make additional super contributions
The way superannuation is structured means many women won’t have enough in their super fund to retire comfortably. This is down to many factors, including taking career breaks, having kids, working fewer hours, looking after ageing parents, and being unable to access higher-paid roles. This means making additional super contributions is important for women, particularly in the earlier years of their life when contributions will accrue the most interest, and before they take time out of the workforce to have kids. These contributions don’t need to be large lump sums. In fact, FairVine Super’s calculations show that setting aside only $5 a day from the age of 30 will result in an additional $123K in today’s dollars by the age of 67.
This story first appeared on Ladies Finance Club.