Superannuation is a crucial part of your retirement planning in Australia, and ensuring your super is on track can significantly impact your financial future. An annual checkup of your superannuation account helps you stay informed, make necessary adjustments, and maximize your retirement savings. Ignoring your superannuation is never a good idea. After all, it is probably your biggest or second biggest asset if you own a home. Give your super an annual check up.
But because retirement is a long way off, some Australians adopt a set-and-forget approach. Leaving it, unchecked until their impending retirement. By then, it could be too late. If super payments have been missed or you have been underpaid, it is almost impossible to fix.
Superannuation apps and online services help make it easy to check your super payments and balance regularly. Here’s a step-by-step guide on how to give your superannuation an effective annual checkup.
- Review Your Superannuation Balance
Start by checking the current balance of your superannuation account. Compare it to the previous year’s balance to track growth. Your balance should ideally be increasing each year, reflecting contributions and investment returns.
- Assess Your Contributions
Ensure that the contributions being made to your superannuation are accurate. This includes:
- Employer Contributions: Confirm that your employer is making the correct super guarantee (SG) contributions, which should be at least 11% of your ordinary time earnings.
- Personal Contributions: Review any personal contributions you’ve made, such as concessional (before-tax) and non-concessional (after-tax) contributions. Check if you are maximizing your contribution caps.
The tax office has an ‘estimate my super’ tool and the regulator’s moneysmart has an ’employer contributions calculator’ to help you work out how much super guarantee (SG) should be paid. It tells you the four dates a year that your employer must legally pay the SG.
The SG is rising on July 1, 2024, from 11% to 11.5%. The super guarantee will increase by a further 0.5% on July 1, 2025. Be sure to check your super to make sure you’re receiving these increases.
- Evaluate Investment Options
Superannuation funds offer various investment options ranging from conservative to aggressive. Assess the performance of your chosen investment option over the past year. Consider the following:
- Returns: Compare your investment returns against the fund’s benchmark and other available options.
- Risk Level: Ensure the risk level of your investments aligns with your retirement goals and time horizon.
- Check Fees and Charges
Fees can significantly impact your super balance over time. Review the fees you are paying, including administration, investment management, and advice fees. Compare these fees with other super funds to ensure you are getting value for money. If the fees seem high, consider switching to a lower-cost fund.
- Review Insurance Coverage
Many superannuation accounts include insurance for life, total and permanent disability (TPD), and income protection. Check:
- Coverage Levels: Ensure the coverage is adequate for your current circumstances.
- Premium Costs: Assess whether the premiums are reasonable and do not excessively erode your super balance.
- Beneficiary Nominations: Make sure your beneficiary nominations are up-to-date, reflecting any changes in your personal circumstances.
- Consider Consolidation
If you have multiple superannuation accounts, consolidating them into one account can save on fees and simplify management. Use the ATO’s online tools to locate and consolidate your super accounts. Before consolidating, check for any exit fees and compare the insurance and investment options.
- Utilize Government Incentives
Check if you are eligible for government incentives, such as the super co-contribution or the low-income super tax offset (LISTO). These incentives can boost your super balance, especially if you are a low or middle-income earner.
- Plan for Retirement
Estimate how much you’ll need for a comfortable retirement and compare it to your current super balance. Use retirement calculators provided by super funds or the ASIC MoneySmart website. This can help you determine if you need to adjust your contributions or investment strategy.
- Review Your Fund’s Performance
Compare the performance of your super fund with other funds in the market. Consistently underperforming funds may warrant a switch to a better-performing fund.
- Seek Professional Advice
If you’re unsure about any aspect of your superannuation, consider seeking advice from a licensed financial advisor. They can provide personalized advice tailored to your financial situation and retirement goals.
An annual superannuation checkup is essential to ensure your retirement savings are on track. By reviewing your balance, contributions, investment options, fees, insurance coverage, and taking advantage of government incentives, you can optimize your superannuation strategy. Stay informed and proactive about your super to secure a comfortable and financially stable retirement.
How can we help?
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