For most workers in Australia, superannuation is an unavoidable part of life. By law, employers must deposit at least 9.5% of your pre-tax salary/wages into a nominated fund, which you can't access until retirement.
Love it or loathe it, super is here to stay, so choosing the right fund is one of the biggest things you can do for your long-term wealth. After all, if you're putting away nearly 10% of your income for 45 years, you want to make sure it's being looked after.
Unfortunately, the 2018 Royal Commission into the financial services sector exposed many super funds that were ripping off their members. By asking yourself the following three questions, you might find you can do better elsewhere than where your money is currently stored.
Do I have more than one super fund?
In the modern world, the concept of a job for life has long passed for most people. By the time we retire, it's common for most people these days to have worked at least a dozen different jobs before retirement. That means a dozen times where you might have set up an additional super fund.
Each super fund charges its own set of fees, so if you have 2 or more, chances are you're paying twice as much (at least) in fees than you should. So make sure you check whether you have more than one super fund and wind down any surplus accounts if so.
Am I getting charged fees for nothing?
If you're 20 years old, chances are you don't really need life insurance. But your super fund might be charging you for it anyway. Checking what you're actually paying for could save you thousands of dollars in extra fees through the course of your working life.
Similarly, if your super fund is just plain expensive, you should really investigate if you're getting value for money. Performance and fee comparisons are out there, so a quick 10 minutes of digging on your fund compared to others out there could save you a lot of pain down the road.
Am I selecting the right investment choice for my circumstances?
Most super funds will put new members in a 'balanced' option, which mixes growth assets like shares with defensive assets like bonds. This might be ok for some people, but if you're under 40, chances are you might be better off with a high-growth option.
Even better, most super funds now offer a choice to just invest in ultra-cheap index funds, which tend to match or outperform the other choices over time anyway. Again, just a small amount of research could be worth a lot down the road.
Foolish takeaway
I think anyone who might be worried about what their super fund is doing for them would benefit from asking themselves these 3 questions – just some general housekeeping for their super.
This is an industry that's highly lucrative, and therefore full of money traps that the unsuspecting worker can get caught in. Don't be one of those people – ask some questions and make sure your money is working for you, not someone else!
