How to Make the Most of Your Super Fund

Super

Making the most of your super fund is an essential component of financial planning. A well-structured investment portfolio can help ensure a comfortable retirement and maximise returns over the long term.

Promoted by Lucy Mitchell, Current Australia 3 minute read

It's important to understand some key concepts when it comes to investing in a super fund, such as diversification, asset allocation and risk management. If you fail to pay attention to these principles, you might miss out on potential returns or risk living a less comfortable retirement.

Use these tips to make the most of your super fund.

1) Diversify Your Investments

Diversifying your investments is a critical part of a successful super fund strategy. It's important to have a stake in bonds, stock shares, and cash, especially if you're approaching your retirement age.

Your super returns from high-risk investments have a chance of getting exponential returns, but you'll want to pad your portfolio with safer, low-risk investments to compensate for any hard recessions severely affecting your investments.

By spreading your investments across different asset classes, you're better equipped to handle market fluctuations and get financially ready when retirement age comes. This ensures that your super fund will still have value when you actually retire.

2) Consolidate Accounts

Many Australians have two or more super fund accounts because they switched employers several times. It might seem like you're better off having multiple accounts, but in reality, it reduces your retirement savings because of its management fees and other related costs.

Consolidating these accounts can help reduce the total amount of administration fees you pay while also helping you keep track of your investments better.

That said, there are some instances wherein consolidating may not be the most ideal strategy.

For example, you may lose on tax benefits or insurance that you're benefiting from having more than one super fund account. Closely examine and analyse the pros and cons of each situation before making the move to consolidate.

3) Utilise Low-Income Superannuation Tax Credit

The low-income superannuation tax offset (LISTO), offered by the government, will be deposited into your super account if you meet the requirements and have an adjusted taxable income of up to $37,000.

The LISTO will equal 15% of the pre-tax contributions made to your account, up to a maximum of $500, as long as your fund contains your tax file number.

In 2022/2023, if your income is less than $57,016 during the 2022/23 fiscal year, you may be eligible to receive a co-contribution.

4) Make Voluntary Contributions

You can boost your retirement savings by making additional voluntary contributions to your super fund. This can be done by having your employer make regular contributions on your behalf to your super.

If you're self-employed, you're doing the payments yourself by essentially taking a pay cut for your retirement funds. Understanding how SMSF loans work is important, so don't hesitate to seek out the help of a financial advisor if you need any guidance.

Voluntary contributions can also be made directly to your super fund from your bank account after tax. The money will then be taxed at the concessional rate of 15 per cent (or 30% if you're a high-income earner) instead of the marginal tax rate.

In essence, once your money is within your super savings account, you'll be able to grow it at a faster rate since you'll have more favourable tax treatments on your investments.

5) Get Your Spouse a Super Fund

If your spouse hasn't arranged a super fund yet, then consider setting it up and contributing to it. The government provides tax offsets for contributions made up to $3,000 for low-income or unemployed individuals that your spouse can benefit from.

When you make these contributions, you'll be able to reduce your taxable income and get a refund back by claiming an 18% offset on the contribution up to $540 if eligible. This is one effective way of boosting your retirement savings while also receiving tax benefits.

6) Find Lost Super

Over the years, you may have worked several different jobs across the country and have accumulated several different super funds. Tracking down all these accounts can be a real challenge, and leaving them unclaimed or forgotten means that you're essentially losing out on benefits.

Using the ATO's online service, you can find your lost super accounts by submitting some identification details such as your tax file number and full name This way, you can determine whether the ATO has been holding onto any unclaimed super on your behalf.

You may be unknowingly paying multiple charges without knowing it, so it's a good idea to clear things up and ensure that you're not missing out on any of your retirement savings.

7) Review Your Super Fund Performance

One last important tip is to review your super fund annually. This is to ensure that your super fund is growing and that your financial goals are not veering too far off-track.

If you're not getting as much as you'd like out of your fund, closely analyse your super performance annual statement to diagnose the problem. By doing so, you can identify any fees that are being charged and also ensure your investments are on track for your retirement goals.