Four simple super mistakes – and how to avoid them

One in three Australians doesn’t choose how their super is invested – meaning their super may be invested in a default option¹. At Colonial First State, our Employer Super default options are life stage-based, so the investment mix changes according to your age and life stage.

However, members who have not reviewed their super investment options for many years – members who were previously advised, for example – may no longer be invested in the appropriate risk profile.

If you’re not planning to draw on your super in the next few years, you may be better off investing in options that offer better returns over the long term – even at slightly higher risk.

This can make a big difference to your super balance at retirement.

For example, Ben earns an average male income of $109,532 a year³. An average super balance for someone on that income at age 30 would be $32,000, according to figures from the Association of Superannuation Funds of Australia².

If Ben invested his super in a balanced option, he could expect an average return of 6.2% per annum compound growth; this would increase to 7% if he invested it in a high growth option.

His super could earn $83,303 more invested in a high growth super option than in a balanced super option over 30 years⁴ – even if he doesn’t make any additional contributions.

_{Assumptions: Employer contributes an amount equal to 12% of ordinary time earnings. Incomings and outgoings are received mid-year. Amounts are in today’s dollars, meaning they are adjusted for 2.5% annual inflation and a further 1.2% in rising community living standards⁴.} 

If Ben waits until he turns 50, he could still be $22,336 further ahead at age 60 by investing in a high growth super option. 

Additional voluntary contributions would mean the balance of each account, and the difference between them, would be likely to increase further.

Many people move some or all their money to a more conservative investment mix in the years around the point of retirement. This minimises the risk of losses early in the drawdown period when they have the biggest potential to limit super growth in retirement. 

• Check your risk profile – does it match the investment mix of your super option?
• It can be confusing, knowing the right investment mix for you, or when to change. If you would like some help, we can help you access financial advice to suit your needs. Explore your advice options. 

Another oversight that many people make is simply not engaging with their super.

If you don’t check in on your super, you won’t know how much super you have, whether it’s been paid to you correctly, how quickly it’s growing, or whether your super option is performing the way you need it to perform.

• Log in to your account via FirstNet or the mobile app.
• Check your balance, investment mix and how your super option performed in the past financial year.
• Use the ATO’s Super Guarantee estimator to check your entitlements, and if you think there may have been a mistake, talk to your employer. There are ways to follow up super payments from past employers as well. 

Super is actually a tax structure designed to make it easier for Australians to save for their own retirement. But many Australians don’t take advantage of the tax benefits of super. 

It’s generally a good idea to make regular contributions to your super, if you can afford it, to top up the compulsory payments your employer makes.

And if your employer offers salary sacrifice, and you contribute from your pre-tax salary, the amount by which your take-home pay is reduced may be considerably less than what gets paid into your super depending on your tax rate. It may also reduce the amount of tax you pay.

• Email your employer’s accounts or payroll team to see if you can salary sacrifice into super. Even $50 a month will help, if your budget allows. 
• Consider if you can contribute some of your tax return to top up your super. Advice can help you understand the tax implications of different types of super contributions and the right contribution strategy for you. Learn more
  

If you aren’t sure how much super you'll need at retirement, or you don’t have a target in mind, one way to understand how much super you’ll need is to use a retirement calculator.

Once you’ve set your super goal, it’s worth checking in on your super every six months to ensure you’re on track and your goals are still right for you.

You can also get help to set your goals from a financial adviser. If you’re concerned that financial advice is beyond your reach, you may be pleasantly surprised: there’s an advice option available to suit every need.

• Use our retirement calculator to learn how much super you need
• Learn more about the different financial advice options available.