Superannuation is an example of a ‘nest egg’ asset. It’s designed to give you an investment that you can make regular contributions towards, the ultimate aim being to create ongoing income upon retirement.
Here’s a secret, there are only a limited number of levers you can pull if you want to maximise the long-term performance of your super fund, and the sooner you take action the quicker you will get ahead in the superannuation game. With that in mind, there are three levers within our control; Fees, Super Choice and Super Contributions, that will allow us to maximise our superannuation nest egg.
Your first superannuation lever: Fees and Charges
It’s important to minimise the fees and charges you pay to both the administrator of your super fund as well as those that manage your investments.
However, often too much time is invested debating high fees versus low fees. Remember, this is about the long-term investment strategy and shouldn’t be clouded by the short term. This means you need to examine your fund’s asset allocation as well as your own behaviour.
Some funds also promote themselves as being fee-free, however, the potential cost of this is that half of your assets might be sitting in cash for a period of 20 plus years. A short-term fee saving could well prove to be very expensive.
Your second superannuation lever: Super Choice Asset Allocation
Have you made an active super choice on how your superannuation is invested? No?
You’re not alone as the majority of people rely on their employer to choose a default fund on their behalf. If you take this approach, you may end up having 40 percent of your super invested in cash and bonds. The impact of having such a high allocation to what are known as defensive assets is that it could be a significant handbrake on your portfolio and cost you thousands of dollars over your lifetime.
Your third superannuation lever: Your Super Contributions
Super contributions have a very real impact on the performance of your fund. Not enough of the population consider strategies such as salary sacrifice.
In a world where almost all of our personal income is already allocated, consider salary sacrificing a percentage of each and every salary increase or bonus you receive. This allows you to allocate monies you would have otherwise spent and get the magic of compound interest working in your favour, did you know that $1,000 saved today, and invested wisely, could be worth more than $13,000 in thirty years?
Your superannuation success
Superannuation success begins with you, it’s your choice who administers your super, how your funds are invested, as well as how much money you are putting aside. Make sure you learn about your options and if you need more assistance, speak to a licensed financial planner, preferably one of the team at Evalesco
If you would like to know more about your superannuation choices please contact me firstname.lastname@example.org