How will the new super contributions cap rules affect you?
As part of the 2016 Federal Budget and subsequent announcements, the Government is making significant changes to super contribution rules.
There’s no better way to secure your financial future than by putting money into super. And in Australia, we’re lucky to have a system that helps us grow our retirement savings through compulsory contributions from our employers. These are known as superannuation guarantee (SG) payments.
But even though SG payments are your employer’s responsibility, that doesn’t mean you should ‘set and forget’ your super. If you leave all the decisions to your employer and your super provider, you may not get the greatest benefit from these compulsory contributions.
That’s why it’s worth taking a proactive approach towards growing your nest egg. Here are three things you can do today to make your SG payments from your employer work harder for you in the long run.
Step 1: Choose your super fund
If you don’t choose your own super fund, your employer will set up an account for you in their default fund and make SG payments for you into that account. But your employer’s choice of fund may not necessarily be the best option for you — so it’s worth taking some time upfront to research what else is out there.
When choosing a super fund, consider things like:
Step 2: Consolidate your super
Once you’ve picked a fund, it’s a good idea to make sure all your super is in the same place. If you’ve changed jobs, different employers might have made your SG payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about.
If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings. On the other hand, if you roll over all your super into a single fund, you’ll not only save on fees but you’ll also find it easier to keep an eye on your money.
Luckily, it’s simple to track down and consolidate your super. Just ask your fund to do it for you — most funds will happily provide this service free of charge.
Step 3: Tailor your investment mix
Once you have all your super in the one place, you should decide how you want your fund to invest it.
While your employer keeps making SG contributions, your super will continue to grow. But you can make these payments work even harder by choosing an investment strategy that’s right for your life stage. To do this, you need to consider your retirement goals and how long you have to reach them.
When you’re young and have many years of work ahead of you, you also have enough time ahead to ride out the highs and lows in investment markets. This means you could take advantage of a growth investment strategy with the potential to deliver higher returns over the long term.
On the other hand, if you’re planning to retire and cash in your super in the next five years or so, then it may make sense to choose a more conservative investment strategy. Your returns will probably be lower than with a growth option, but they're also likely to be more stable.
Get help from an expert
When you’re planning for your retirement, it can be hard to know if you’re making the right financial decisions. That’s where a professional adviser can help. Think of your adviser as a personal trainer for your finances — they can give you the guidance you need to get in great shape for the future.