Is it Time to Review Your Superannuation?

Picture this… when you were 18 years old your well-meaning but financially inept uncle put $1,000 into an ordinary bank account for you instructing you to leave it there and let the bank’s interest turn it into a fortune to fund your early retirement. You followed his directions only to discover that when you reached 55 the balance of your “fortune” was just $2,094.64!  What went wrong?

Well, to put it frankly, you didn’t give it any attention! And this is a classic mistake that many Australians make when it comes to their investments and their superannuation. Here are some questions to ask yourself, then come and talk to us:

How long has it been since you reviewed your superannuation to see if it’s on track to meet your retirement needs, regardless of whether your retirement date is two years away or twenty?  As your personal circumstances change, so should your strategy to ensure you are accumulating a nest egg for retirement in a tax efficient manner. Having a regular review will ensure you achieve the best possible outcomes given the market conditions.

Do you know how your super is invested? Have you ever made any changes to suit your own circumstances? If you’ve never made a change, chances are that you’re still invested in your company fund’s default investment option, which may not be appropriate to your needs. Many people don’t realize that the default ‘balanced’ investment option for many super funds means 70% of the fund is invested into the share market.

The following example explains; Brian (53) and Ingrid (23) work for an employer that pays their super contributions into the company’s preferred fund, which has a default investment option of cash. This suits Brian as he doesn’t like risk and plans to retire in two years. However, it does not suit Ingrid, who is unlikely to retire for a further 40 years and is willing to accept short-term volatility to achieve higher returns in the long term.

Are you making personal contributions to super? Making ‘salary sacrifice’ or non-concessional contributions to superannuation is one of the easiest and most effective ways to boost your retirement savings. You may also earn additional tax benefits or government co-contributions. On the other hand, if you are making regular contributions, are you certain that you’re staying within the set limits and won’t be penalised for contributing too much?

Have you got more than one super fund?  If you do, then your retirement savings will be eroded unnecessarily by paying multiple management fees.  For the best efficiency you want to roll over all your superannuation into a single fund and use an investment strategy tailored to your personal situation.

Have you got assets that would be better off being owned by your  super fund? Assets like commercial property or shares may qualify to be transferred into superannuation  as an ‘in-specie transfer’ reducing personal taxation and also allowing these assets to qualify for a reduction or even exemption from capital gains tax.

Who will receive your super when you die? Have you nominated a beneficiary on your account, or want to make a change to your existing beneficiaries? Binding nominations are valid for only three years. Is yours still current?

Does your super fund provide any insurance cover?  If it does, remember to check the level for which you are covered. You may find that your existing cover is now inadequate and it’s time for a top-up.

Are you considering a self managed super fund?  Self managed super is a powerful strategy but only when it’s implemented correctly.  Without the correct investment strategy, structure and proactive management of your fund, you can get a worse outcome than leaving your savings in a managed fund.  The compliance requirements of a SMSF can be onerous and failure to comply can result in significant penalties.

Are you 55 or over and ready to  use transition to retirement?  From age 55, you may be able to start drawing a pension from your super fund while salary sacrificing more of your salary as super contributions.  This provides an immediate benefit of significantly reducing your personal taxation.

Aside from your own personal circumstances shifting, the rules relating to superannuation are always changing, so it pays to review your super every year. You don’t want to reach that long-awaited retirement date to find you don’t have as much as you had “hoped”.

Fusion Private Wealth located in Norwest Business Park is a boutique financial services business specialising in Self Managed Superannuation and holistic financial advice.  For more information or to arrange an appointment, please contact us.

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