Savings Guide - Daily Saving Money Tips » Superannuation

Treating Your Super As An Investment

Fran Sidoti — Wed, 25 Jan 2012 05:00:25 +0000

Recently, I transferred all my superannuation into one fund, a long overdue task. Once completed, I sat down to have a look at how best I could structure my superannuation to perform over the next 40 years I’ll be in the workforce. Little did I know the world I was walking into. I printed out the chapter from my obliging fund on all my different investment options, and sat down to try and get my head around it.

Pre-Mixed Options

Like starter packs, super funds offer pre-mixed options. These are diversified portfolios of investment. Generally, if you don’t contact your super fund to switch things around you’ll be automatically assigned to a balanced portfolio, designed to have a moderate level of risk but to make enough returns to keep pace with inflation and grow your money gradually. The pre-mixed options are based around the percentages of both defensive and growth assets, and will range from conservative through to around 85-95% growth assets, with the remainder invested in defensive options.

Sector Investment Options

Then, as if the pre-mixed wasn’t dizzying enough, there are sector investment options. This means you invest solely in a specific asset class- cash, bonds, property, shares, either Australian or international. Of course, you don’t have to invest all your super in any of the options, you can split it 100 ways should you wish. Cash and bonds are low risk, property is high risk and shares are high to very high risk. Another consideration is how long you are intending to keep your superannuation invested which, along with your risk tolerance, can influence how you invest.

Individual Manager Options

Another possible option is to invest with individual managers, companies with which your fund has (as they delightfully put it) an ‘arm’s length commercial relationship’. Interestingly, while there was an explanation in my guide about the labour and environmental standards awareness of the super fund, there was no breakdown of each company according to their adherence to those qualities. It would also be very difficult to be sure who you were invested with on any of the pre-mixed options and what kind of companies your money was supporting.

What You Can Do

There’s a good risk tolerance calculator on the BT website, which can give you an idea of what your risk profile is. The calculator also generates what they view as your most suitable super investment option. It’s all about what you feel comfortable with. Cash won’t keep pace with inflation, but if you sleep better at night knowing your money is safe, then that may be the best option for you. There’s a whole range of options to suit varying risk profiles. The other factor is time. For me, at the start of my working life, I have a lot of time in which the share market can dip and dance before things get tighter. For someone about to retire, a higher risk strategy is not optimum. After you’ve organised how best to invest your money, start contributing to it. The government will match you up to a thousand dollars annually, and with compound interest, that might result in a significant difference upon retirement. There are a couple of interesting articles in this week’s Herald Business section for further reading on what might be coming in the year’s ahead.

5 Reasons To Retire Later

Fran Sidoti — Tue, 01 Nov 2011 05:00:36 +0000

The thought of retirement is a complicated one. For many, the chance to enjoy the earnings of a lifetime’s work is a dream. A less stressful life, doing the things you enjoy. For others, I would think that the prospect of hours upon hours of free time is probably a little daunting. After all, work comprises a large part of our identity and though we fantasise about having more time, often when I unexpectedly grab a couple of hours I don’t really know what to do with them. And then there’s a third category; those who had set a certain timeframe for their retirement and have had to push it back due to their financial situation. Not an unusual situation, but an adjustment that may not come easily to some. Yet, there are lots of advantages of sticking in the workforce a while longer. Here are six benfits.

Increased Earnings

Not only do you earn more money over the period you stay in the workforce, you are also able to contribute a greater amount to super, meaning your nest egg at the end of your working life could be much improved. Why not set up the extra years as transitional; increase your super contributions to the maximum possible, and start cutting back on expenditure you won’t be able to afford in your retirement. Make small adjustments, and let your superannuation interest accumulate in the meantime.

Less To Fund

One of the difficulties of retirement in this age of health and lifespan, is the length of time you might have to fund. If you retire at 60, you could be looking at trying to fund 30 years of retirement, which is a pretty difficult task. Retiring later will mean you have less non-working years to provide for, and can live them at a higher quality of life than if you had retired earlier.

Peace Of Mind

Could there be a worse feeling than scrimping and barely getting by in your retirement? You’ve worked your whole life, you deserve to be able to live it fully once you retire. Not only will staying the workforce guarantee less stress about your retirement years before you retire, it will allow you to sleep better at night during them. If you view the extended time in the workforce as a transitional period, you can use it to properly plan your retirement. What would you like to be able to do? How much money will you need to do it? Start budgeting and working towards fulfilling those financial goals.

Hale And Hearty

Working might seem like it drags on your health, but staying engaged in a workplace can keep you on your toes and sharp for longer. Those who retire earlier could more quickly settle into a sedentary lifestyle, which could lead to a whole range of (costly) health problems. Staying in the workforce could keep you fit and healthy, as well as continuing to provide a place of social interaction.

Slowing Down

Later retirement doesn’t mean you have to stay working an 80 hour week, it can mean cutting down your hours and moving into retirement in a considered way. After all, it’s a huge change. You won’t have had that much time for leisure since before you went off to preschool. So while the financial advantages are manifold, it will also help you slowly to adjust to a new routine, making the transition smooth as opposed to bumpy. You’ll also have a greater time to pass on your knowledge and train the next generation of workers.

Finding Lost Super

Fran Sidoti — Tue, 18 Oct 2011 18:10:22 +0000

I sat down tonight and finally filled in all the forms to roll my super into one account. At 24, I had managed, with a variety of jobs and a fair deal of laziness, to garner myself three separate super accounts. And I know if I don’t work it out now, I will quite easily misplace some of it in the years to come. It’s so easy to do- you start a new job, they mention what super fund they use and you say it should be fine. Come the end of the financial year, you have three statements. Come retirement, you have bits and bobs of superannuation all over the place, earning fees and not garnering the interest it could be. Here are some tips on finding your super and getting it all into the one spot.

SuperSeeker

All lost or unclaimed super is now registered with the Australian Tax Office, so they are without a doubt your first port of call. SuperSeeker is the tool used to find the lost dollars, simply use the internet or get in touch with the ATO via phone or mail. Any recent super you have misplaced should come up. If you have any problems with the website, give the staff a call. There’s a lot of misplaced super floating around, and they’d quite happily help to find it’s way back home.

Eligible Rollover Funds

According to Yahoo! Personal Finance, any lost superannuation gets rolled over into a Eligible Rollover Fund (ERF) which holds the money. If SuperSeeker can’t help you, it’s worth your while getting in touch with the 16 ERFs in Australia. If you made super contributions before it was compulsory that your tax number was declared, if you’ve changed addresses or names, this could all contribute to superannuation being misplaced, and the people at the ERFs can take you through it. After all, it’s only 16 calls and could be worth a significant amount of money.

Super Fund Lookup

The first two options should have uncovered any lost super you have. But if you’re looking for super in a certain fund, and not in a holding account, look at the government’s Super Fund Lookup. At this point in the game you have little to lose by a quick web search.

Consolidate, Consolidate, Consolidate

In order to prevent this situation arising, try and keep all your super consolidated in one spot. It’s hard, with several different jobs and often several different industries, but you’ll lose thousands upon thousands in administrative costs alone, let alone the money you might accidentally not claim. I worked casually in a job for one day, I was helping out a friend, doing some administration. And I got my own super account, which I then had to pay fees on, look at all the data and eventually transfer. Stop the situation from arising by settling on one fund, and asking your new employer to put the money in that account. Contact any other super funds you have, ask them to be closed and the balance to be transferred to your final account. And while you’re at it, why not look at filling in a form for some voluntary contributions? The government will match you up to a thousand dollars, and with compound interest over the next 40 years, it could be the smartest financial decision you can make.

Delaying Retirement: The Pros

Fran Sidoti — Sun, 14 Aug 2011 20:00:36 +0000

While everyone might be talking about the days when we’ll kick back and play bingo in our retirement, in reality, most people are delaying the fateful moment by years. A recent Gallup poll found American workers now expected to retire at 66, as opposed to the expected age of 60 in 1995. So what are the pros of delaying your retirement by a couple of years? Read on, inspired by MSN Money.

Save More

Your much-loved but essentially annoying children have moved out, you’re not working at an entry-level position but at a well-paid position and you are probably close to finishing off your mortgage repayments- what better time to save than the couple of years before you retire? You’ll have greater motivation and, potentially, less drains on your potential savings. The amount you save in those years could make all the difference to the quality of your retirement. Additionally, you’ll have less years in retirement to finance- I had never considered this, but Baby Boomers can look forward to 20 to 30 years of retirement. Beyond finding the money to finance that period of time, where am I going to find enough activities?

Social Life

You’ve spent a lifetime building up close relationships with lots of different people, and I’m sure we all fantasise about That Day when we never have to talk to the micromanaging busybody down the hall. That said, work is a massive part of our social interaction- 8 or more hours a day when we are impelled to be nice to one another. And often we build up close relationships with our colleagues which, I can imagine, would be difficult to lose in the day-to-day of retirement. It is suggested in the MSN Money article (and in far too many examples from our real lives) that readjusting your home life once you have retired can be a big change. On top of that, it’s been shown that most couples have widely varying ideas about retirement. Delaying your retirement by a couple of years might give you a chance to get all that out in the open. If you’re both on the same page about when you will retire and what your income will be, you’ll be less likely to get embroiled in a retirement fracas. Beyond anything, it’ll enable you to adjust your budgets and lifestyle expectations to suit your new income level.

Look To PT

Delaying your retirement for a couple of years will allow you to evaluate how you want to spend your retirement and to start preparing for it. If you want to stay involved in the workforce in some capacity, your finances will be all the better for it. Start looking for opportunities in your extra years in full-time employment. Set up your retirement schedule and routine while you are still in the workforce, so your transition can be smoother. The more you prepare, the less financial hiccups you will have in the process. And part-time involvement in the workforce, even if voluntary, will keep you active and engaged in the community. If you are holding onto some paid work as well, you’ll be in an improved financial position for your retirement.

Adult Kids, Estates And The Intervening Years

Fran Sidoti — Mon, 18 Jul 2011 20:00:48 +0000

My brothers and I are useless. None of us went into lucrative careers, while all of us are blessed to be working in fulfilling, creative jobs, none of us look likely to live (financially) profitable lives. Luckily for us, we’re all equally hand-to-mouth but what happens when one child of the family is continually asking for money while the others are now financially independent? The whys, wherefores and what to do with the will.

Always A Parent

Let’s face it, you’re never going to stop wanting to help out your kids. One big factor in this situation is the reason why the child is asking for money. Some kids have a tougher time than others- they might work in a less lucrative job, or be raising a child alone, or has lost their job in a reshuffle, financial experts feel it’s okay to lend them a helping hand without making similar reference to the other kids. Chances are, they’ll be completely happy for you to assist their sibling when there is an obvious need for it.

Always A Net?

The flipside is the adult children that have never learnt to manage their money, and use you as a safety blanket. The difference is not solely in the intention- it’s also likely to be an ongoing issue. Helping your kid out of a bind is one thing, and they’re likely to financially independent once they get back on their feet. Helping your kids out when they’ve spent all their money on trivialities and can’t afford rent is unlikely to be a pattern that solves itself.

Assistance, Not Money

If you find yourself in a situation where a child is requesting financial assistance which you feel unwilling to give, there are, of course, alternatives. Offer them the spare room until they can afford to live independently. Ask your friends if anyone is looking for someone to pick up a bit of work, so they can supplement their income. If your kid is genuine, they’ll be happy of the help. Times can get rough and your kids are going to have differing abilities to ride the ups and downs of existence- therefore, providing sensible and functional ways for them to get back on their feet might do them a lot more good that a straight handout, whether they can recognise that or not.

In Writing

Should you decide to help out an errant child or the amount of money that is going to change hands is large, the best idea is to get it in writing and explain to them that the money is to be considered as an advance on their inheritance. If they’re not comfortable with that, they should consider other means to get out of the bind. Do it conclusively as well, make sure you have informed your lawyer of the change so when the time comes for the estate to be divided, everyone is clear and there are no grey areas. At the end of the day, money is a stupid thing for people to lose relationships over, so making your estate as clear-cut as possible is the best move you can make to ensure continuing family harmony. Or spent it all. After all, you earned it. Maybe that’s the most equal distribution there is!

Retiring Early: Redemptive or Risky?

Fran Sidoti — Sun, 03 Jul 2011 20:00:51 +0000

I’ve been in the workforce five years and I’m already thinking about retiring early. It’s a well-worn suggestion that the years you could most ‘fully’ enjoy your money are the ones you lose in earning it. When thinking about getting out of the rat race earlier than most, there are some necessary considerations. Here are a couple, drawn from MSN Money.

Planning It Out

The earlier you retire, the more years of non-earning you will have to save for. It’s pretty self-evident, but hard to fulfill in practice. You will have less time to save for a greater period of retirement. If you’ve decided an early retirement is a big priority, then saving for it can be done but it’s going to require significant planning and an ability to make sacrifices in the now in order to fund your future.

Boom Baby

Of course, Baby Boomers are the most obvious candidates to retire early. Their parents, the Builders, lived up to their name exactly. They built, worked and retired when they could either afford to or were forced to. The Boomers, on the other hand, don’t mind the odd spot of self-indulgence. So they are a generation who will require more money to live comfortably in retirement, and yet want to kick it off early. Understandable, of course, but what steps need to be taken to ensure all sails smoothly?

The Big Q

In order to prepare for an early retirement or properly evaluate whether or not you can afford one, a couple of questions might come in handy. For instance, as suggested in MSN Money, ‘what do you plan to do over the next 25 years?’. Just not working as an answer is probably more indicative of your career than of your plans to retire. After all, you’re retiring early in order to use your years in a fulfilling manner, not just because you hate your job. Are there enough things to keep you occupied and happy during your retirement? Are you prepared for the change of lifestyle? Work out what you want to do with your time, and then work out how you can do it financially.

Know How Much You Need

According to this article, while people generally express confidence about how much money they will have for their retirement, very few know how much they will actually need. Which makes it tricky to set aside an accurate figure every week or month. Once you’ve worked out the necessities of your retirement, and some of the luxuries, work out how much you need to start setting aside now.

Understand The Risks

The GFC wreaked havoc on the plans of a lot of people I know- their super, perhaps set up on more high risk ventures, was decimated in the bust. It’s a risk of retirement savings- a bad economy, inflation, losing your job at the crucial moment. It happens, and it’s important that you’re aware of the risks and have built in some responses and emergency plans should something unexpected happen. With a greater understanding of risks comes a better ability to ride out the storm.

She-Proofing Your Retirement

Fran Sidoti — Wed, 08 Jun 2011 20:00:23 +0000

Come again? “She-proofing”? If you’re a woman, you’ve probably already thought about it, if not particularly under that name. Annette Sampson from the Sydney Morning Herald writes on how women can protect and bolster their retirement funds.

Is It All That Super?

Superannuation was essentially designed for men. I don’t mean that to sound sexist, and in some cases, it may not be true. But by and large, superannuation was designed to benefit people who are in the workforce for the full extent of their working life and, in this day and age, that tends to be men. It is not designed as adequately for those who aren’t in the workforce as much. The Australian Institute of Superannuation Trustees, writes Annette Sampson, suggests that taking seven years out of the workforce costs an average of $70, 000 in lost retirement savings. That seven years isn’t hard to account for with child-rearing or part-time work, so there are plenty of women out there who have lost a large chunk of their super assets. So how best to offset this effect, or ‘she-proof’ the ol’ finances?

Plan Ahead

According to the article, the creme de la creme of actions is to prepare early. Even if you take seven or eight years out of the workforce or return part-time, if you can salary sacrifice 15% of your wage as opposed to the compulsory 9%, you will not only be better off than a woman who is in the same situation, you will also be better off than a man who has just contributed 9% over his working life. It’s the compound interest that is the kicker- the earlier you start, the more interest you will earn over your lifetime, including the years when you’re not contributing. If you can’t afford to salary sacrifice that additional money, think about making voluntary contributions.. Research whether the government has any schemes currently in place to match it. For example, if you earn less that $61, 920 a year the government will match you up to a $1000 per annum. You can make regular small payments, which at $20 a week you’re probably going to barely notice, and the government will match you. With compound interest, if you can kick that off early, you’re going to have made a significant step to improve your retirement fund and protect yourself against years out of the workforce.

Move Fast

If you don’t have that much time up your sleeve, there are still some moves you can make to improve your super situation. Salary sacrificing into super is crucial, according to the article, and if you can make after-tax contributions as well, then go for it. If you’re not working, your partner can receive a tax rebate of up to $540 for a $3000 contribution on your behalf- which is not such a bad plan for the years earlier in life when you were out of the workforce as well. Contributing higher amounts to super as the years progress- say, putting your pay raises straight into super contributions- could enable you to make significant ground in catching up on your retirement funds.

Host Plus Superannuation Fund

Alex Wilson — Thu, 26 May 2011 04:55:16 +0000

Host Plus is an industry super fund that has rapidly grown in popularity. It is similar to other industry super funds in that it is run only to benefit the members of the fund, keeping fees and commissions to a minimum (if at all).

The rise of industry super funds such as Host Plus is largely in part due to Australian consumers understanding that their retirement money is finite – so fees, commissions and funds that are simply run to benefit an investment company are simply not on the cards anymore.

Host Plus – who is it for?

The Host Plus super fund is open to anyone, however it is and was the preferential superannuation fund for hospitality, tourism, sport and recreation workers.

Host Plus facts

At the time of writing this, Host Plus has over 984,000 members with over $9 billion dollars in funds under management. That is a significant amount of money

Do you have lost super in a Host Plus account?

It may be worth while performing a lost super search. If you are like me, I once worked in hospitality and as a result opened a Host Plus account (in fact, my employer made me do it) and in turn my little dribs and drabs of barista money went into my Host Plus account.

I would think many Australian’s who have held multiple part time hospitality jobs will likely have a Host Plus account and not even know it.

Now 10 years on after my first cafe jobs, I think it is time I consolidated my superannuation into one fund. The easiest way to find out if you have money with Host Plus is to call the ATO and quote your tax file number and details, they will then tell you every single fund you have ever had. Who knows, you may find many more accounts you forgot you had!

Call 13 10 20 to get in touch with ATO and locate your lost super.

The 5 Worst Ways To Save For Your Retirement

Fran Sidoti — Thu, 19 May 2011 20:00:09 +0000

Money in the mattress. An illegal bookie operation. MSN Money have put together a list of the worst ways to save for your retirement, and I liked it so much I thought it was worthy of a post. The options are endless, but here are the 5 absolute worst ways to bolster the retirement fund.

Neglecting Your Health

Want something to invest in? Invest in your health. Yes it is expensive. Doctors, treatments- don’t even get me started on dentists. You’ll get all your money back ten-fold. And if you can eat healthily and exercise, you can cut down on a lot of costs later on. There was a recent study in an Aboriginal community where families were given access to cheaper fruit and vegetables every week. Within a couple of months, the hearing of children had improved so much they had no further use for the surround sound systems in class room that were imperative only a couple of months earlier. That blows my mind. It might seem like a cost now. but with care and a bit of money, you can prop your retirement up massively with a healthy body.

Saving, Not Paying Off The Ol’ CC

Yes, people debate this. Which do you attack first? To my mind, it’s best if you can save a little while paying off your credit card debt but if you can only do one, pay off the debt. You’re hemorrhaging money, as long as you have the debt and you’ll have even fewer methods of coping with it later on.

Flirting With The Other Side

Lots of people walk on the less-than-perfect side of things in order to obtain a couple of dollars. I’m a storybook kind of girl, I believe in comeuppance. From lying to Centrelink through to scamming a couple of dollars through business, I think it all comes unstuck in the end. Although all the big payouts to shady company executives does challenge my faith on that one. Hopefully they don’t sleep at night.

Mortgaging Today

Having a properly funded retirement is a scary thing- you want to be able to live without worry. But ruining your present merely for that dream is crazy. You can’t take it with you, so make sure you’ve funded your future but keep some aside for a little bit of fun now. You will not be able to bungee jump at ninety (I don’t think) so if that’s a big dream, I say get onto it.

A Locked Purse

I could definitely afford to give a whole lot more than I do. After all, I earn a good wage, I eat three meals a day, I can (almost) afford to heat my new home. Beyond that, I have lots of time and lots of skills I can use to help someone else out. Living life as if it were all about me and my money really isn’t going to get me anywhere, and it certainly won’t keep me warm at night 60 years down the track. Get out there. Plan for the future, but spend most of your time kicking back with today. And there endeth the motivational speel for this week. I’m off to sit in the sun.

Saving For Retirement

Fran Sidoti — Wed, 16 Mar 2011 20:00:49 +0000

I’m 23 years old. I work a couple of jobs, and have 2 super accounts. I worry about retirement savings. I get to join the club it seems. Here’s the reality of retirement savings, and what we can do to boost ours.

Stats and Figures

Figures released in the USA and put together in an article in Marketwatch showed some worrying trends. Among those workers who provided financial details, 56% said they had less than $25,000 less their home’s value and the pension. Of those, 29% had less than a thousand dollars saved. Most worrying of all, among workers close to retirement, 29% had less than $10,000 saved.

Confidence Lows

The study also found 27% of workers are ‘not at all confident’ about saving enough money for a comfortable retirement and 23% are ‘not too confident’. On the other end of the spectrum, 13% are ‘very confident’, which was a drop from the previous study.

One of the authors of the report, Jack VanDerhei, viewed the results as positive Over-confidence about retirement and ‘everything turning out okay’ was not helpful when it came to savings. He says that peoples’ expectations need to come closer to reality so they save more and delay retirement until they can afford it.

Debt And Basic Expenses

The barrier to saving for retirement is the present. It’s hard to see the purpose of saving for tomorrow when you don’t seem to have enough cash to last today. 34% of workers in the survey said they needed to dip into savings in the past year to pay everyday expenses.

Debt repayments will hamper your ability to save for the future, with 22% saying it was a mjor problem and 41% saying it was a minor problem. Getting control of your finances now will do unbelievably good things for your finances in the future. Budgeting for all your bills properly, allowing for savings and getting on top of debt will eventually free up money for you to set aside for your repayments.

Don’t Rely On A Delayed Retirement

The survey also showed that 45% of current retirees left the workforce sooner than they planned, usually due to a health problem or disability. While a lot of us will plan for a much-delayed retirement, it’s not a bad idea to prepare should retirement come and find us earlier than expected.

We’re lucky, here in Australia, that at least we are not tied to the workforce for health benefits, an element that would surely keep many people in the workforce for a much longer time than they would wish in the States.

Save Both Ways

There are a lot of divisions when it comes to the best way to save for your retirement, and a lot of it will come down to your own personal preferences. Property? Shares? Super? The Old Money Mattress Trick? The Global Financial Crisis was terrible for a lot of people on the brink of retiring as it carved big chunks out of their super, leaving me somewhat wary of the Solely Investing In Super road.

Super is important (and compulsory) but beginning voluntary savings towards your retirement as soon as possible can never be a bad thing. It may seem like just another thing to drain your weekly income but when the time comes to sit on a cruise ship, drinking a Long Island Iced Tea, aged 75, you’ll thank yourself for it.