Take Control Of Your Finances
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Published by TOP4 Team
Have you ever thought about how you will fund your retirement?
If, like most Australians, you answered “no” to the above question, this is a big issue. You need to know where you stand when it comes to your retirement fund. Start by asking yourself the following:
Do I know how much I’ll need in retirement?
Do I know what kind of lifestyle I’ll want?
How much do I currently have in my super, other savings and assets?
Do I know where my super is, what it’s invested in and how it’s performing?
Do I know where I can go to find advice?
If you can’t answer any of these questions, it might be a good idea to talk to a financial adviser. Remember, this is your future, you need to take control! Here are some tips that might help you.
Your Super Fund Fees Let’s assume we have two people who earns $70,000 pa. One has a super fund that charges 0.75% in fees and the other has a fund that charges 2.5% in fees. Both start with a zero balance, contribute the compulsory 9%, and are earning 5% pa. After 40 years, the person with the 0.75% fee ends up paying $87,000 in fees. The person with the 2.5% fee ends up paying $287,000! And that’s just one fund. The average Australian has three, which could mean they are paying three sets of fees.
How You Invest Matters Usually when you start with a new super fund, they’ll place you in the default, balanced option (where investments are spread over different assets, such as shares, property, fixed interest or cash). For someone in their 30s who has 25 to 30 years until they retire, this is a killer. Why? Here is an example. Ben and Lisa each contribute $500 per month into their super fund. Ben prefers to play it safe with a balanced fund where the price moves gradually upward. Lisa is in a growth fund and has learned to accept price fluctuations, knowing she has plenty of time to ride out volatility, or price movements. After 12 months, Lisa’s super fund is worth $2394 more, just because she harnessed the power of “volatility”.
Super For Women… When it comes to super, women are the worst off by far, averaging about half the super balance of men. Women also have a longer life expectancy, meaning their super savings needs to last them longer than their partners. For women who take time off to have kids and raise a family, the scenario can be worse.
...And Families Families who have one parent working full-time while the other is taking care of the kids should look into spousal contributions, which are helpful when one spouse earns more. Income splitting allows you to balance retirement savings between both partners and pay lower taxes on those contributions. For parents working part-time and earning less than $39,000 a year, the government will match your super contributions by 50%.
Do yourself a favour. Pull out your super statement and ask yourself those five questions to find out where you stand. Paying attention today makes it a lot easier to get to where you need to be tomorrow. So, set a goal, start your planning, and get some advice from an expert if you need it. It’s worth it.