10 tips for managing your super in your 20s
Retirement can seem so far away when you're young, but now is the time to whip your super into shape. Here's what you should be doing with your super in your 20s
1. Choose a single fund
For any job you've ever had you are likely to have collected a new super fund to go along with it. Having a bunch of different funds makes it even harder to keep track of how much money you have and to ensure it's actually working for you.
Not to mention the fact that you are likely to end up losing track of some of them if you move house as much as I did in my 20s.
When considering which of the existing funds you want to keep (or to choose a new one entirely), be sure to compare the fees, investment options and other benefits of each fund to help you make an educated decision. There's no right or wrong - it's just about identifying the fund that suits you best.
2. Notify your employer
Once you've decided on the fund you'll be using in future, provide the details to your current employer and, of course, any new employer to ensure that their contributions will go into your chosen fund.
The tax office provides a standard superannuation choice form that you can complete and provide to your employer if needed, although some employers won't require this. Also, many super funds will have their own version of this form pre-filled with many of the details you'll need.
Search their websites and if you can't find what you need give them a call.
3. Consolidate any existing super
Consolidate any existing super. But don't stop there!
Any of your existing super money won't automatically make its way into this new account. You'll need to complete and submit rollover forms for each of your existing funds to direct them to move your money into your chosen fund.
Your new fund is likely to have pre-filled rollover request forms that you can use with all of their details.
However, the tax office also has a generic superannuation rollover request form that all funds must accept by law. Just be sure to complete all the details in full.
4. Check for lost super
It's also worth checking the tax office's register of lost super.
You could have "lost" super if you moved house, for example, and an old fund was receiving returned mail from your previous address. It would register your superannuation as "lost" and it will appear on the ATO's list. You can check online.
5. Select your investments
Once you have all your superannuation tidied up and in the one place, it's time to take control of what you're actually doing with that money.
Your super account is essentially the product, or structure, that holds your retirement savings but within that structure you would usually have quite a variety of investment options.
It's a good idea to review the investment options available within the fund and make a selection as to how you would like your money to be invested, in line with your risk profile and time frame (which is long), along with your values. As an example, you may wish to invest in ethical companies only.
6. Get a head start
It's easy to fall into the mindset that you'll worry about your retirement savings in 30 years when you're actually approaching retirement. However, the secret to building long-term wealth is to start small but start early.
Salary sacrifice is where you ask your employer to deduct some of your pay and put it directly into your superannuation fund, instead of paying it to you.
This may also save you tax (depending on your level of income and marginal tax rate) as all pre-tax money contributed into superannuation is taxed at just 15%.
If you were to contribute just $20 a week from the age of 25 (for, say, 40 years) you'd end up with just under $40,000 in additional retirement savings. That's a lot of money later, for a very little sacrifice now.
7. Take advantage of the government co-contribution
While you're earning a lower salary it's a great idea to leverage the government co-contribution if you can afford to make after-tax contributions.
If you're earning below $51,813 you'll be eligible for up to $500 in free money for your super account provided you contribute $1000 of your own money.
The full $500 will be paid to anyone earning below $36,813 and will be prorated for those earning between this amount and the upper limit.
8. Get insured
Personal insurances, especially income protection, are super important for young people. Contrary to the popular belief that it's yet another thing to address when you're older with more responsibilities, now is the time.
As a young person at the beginning of your career and wealth-creation journey, you are most exposed to the negative impacts of losing your salary due to being unable to work. Once you have built up your wealth, you could rely on that money should you become sick or disabled but right now you'd probably have nothing (or very little) to fall back on other than a handout from your family.
The good news is that many super funds offer a basic level of income protection insurance, along with life insurance and total and permanent disablement insurance, and the premiums are paid from your fund balance rather than out of your own pocket. It's worth checking whether you have any insurances in place, and if not organise something pronto.
9. Keep your contact details up to date
It's common for people in their 20s to move around a bit and as a result end up with lost super, so do yourself a favour and be sure to always update your fund with your new address each time you move.
This goes for phone numbers and email addresses if these happen to change.
10. Educate yourself
Super is a bit of a foreign concept for most of us, since we're not taught anything about it at school. However, this is no reason to keep your head in the sand.
Learning about super and investment markets will ensure you feel more in control and more comfortable over time with your fund and the underlying investments. An easy way to do this would be to sign up for your fund's email newsletter and take the time to read it.
You'll be sure to find useful information that will help you stay abreast of any changes to the fund or to investment markets.