Speaker 1: Welcome to the Friends with Money podcast, brought to you
Speaker 1: by Money Magazine, creating financial freedom for Australians since nineteen
Speaker 1: ninety nine.
Speaker 2: Welcome to the Friends with Money podcast. My name's Vanessa Walker.
Speaker 2: I'm the managing editor of Money and I'm here talking
Speaker 2: to our Super columnist Vita Palaestrand. Welcome, Vita.
Speaker 3: It's great to be here.
Speaker 2: It's great to have you. Now we're going to delve
Speaker 2: into the five top mistakes that people make with regards
Speaker 2: to their SUPER. I think you've got a lot of
Speaker 2: information on it, yes.
Speaker 3: Well, the biggest one, without any doubt, is that people
Speaker 3: are disengaged for whatever reason. They regard SUPER as a
Speaker 3: very boring topic which they can attend to sometime as
Speaker 3: they reach retirement. If you had said to them right
Speaker 3: at the start, this is your investment portfolio and eleven
Speaker 3: and a half percent of your salaries going into it,
Speaker 3: they'd probably pay more attention. But disengagement throughout the two
Speaker 3: to three four decades that you're in SUPER is just
Speaker 3: a lost opportunity.
Speaker 2: I agree. I think people should think about SUPER as
Speaker 2: their investment. It's exactly what it is. Yep, that's precisely
Speaker 2: what it is. It's tax advantaged, there's good regulation around it.
Speaker 3: What could be better, And it's automatic. It's automatic, your
Speaker 3: employer puts it in there. The default fund, which people
Speaker 3: land up in because they don't bother to choose a
Speaker 3: specific investment option, is very well regulated. Funds that don't
Speaker 3: perform have to pull up their socks, and if they
Speaker 3: don't do that, they have to merge with another fund
Speaker 3: or just stop offering the product. Yeah, so it's safe.
Speaker 3: It's very So it's safe.
Speaker 2: All right, we jump the guard because people have been
Speaker 2: chatting about it for half an hour beforehand.
Speaker 3: But here we go.
Speaker 2: Let's start at the top, right, Vita, why pay attention
Speaker 2: to your super early.
Speaker 3: It's locked in for four decades.
Speaker 2: You can't access it until around sixty five, Yes, sixty.
Speaker 3: Well, by doing that, you only ensure that you're in
Speaker 3: the right fund, of a high performing fund, and that
Speaker 3: will pay off. Don't forget when you've got higher returns
Speaker 3: building up over higher returns, over higher returns, you've got
Speaker 3: all that compounding. It's the magic of compounding. It's doing
Speaker 3: a fabulous job for you. But also being engaged, you
Speaker 3: might find opportunities to put a bit more extra in
Speaker 3: to maximize that investment to ensure it grows. You know,
Speaker 3: people when they look back when they reach their point
Speaker 3: of retirement, people who paid attention don't regret it. Yes,
Speaker 3: people who failed to do that regret it. Yes. By
Speaker 3: then it's all too late. There you are.
Speaker 2: So when you salary sacrifice, when you put extra money
Speaker 2: into your super before tax, you only pay fifteen percent
Speaker 2: within super.
Speaker 3: That's correct, it's taxed at fifteen percent, but there's another
Speaker 3: tax advantage by putting that extra in. It might take
Speaker 3: you down to a lower tax rate, so you get
Speaker 3: that kicker as well. So you've got money going in
Speaker 3: that's taxed only at fifteen percent working for you. It's
Speaker 3: up to you to ensure it's working as hard as possible. Now,
Speaker 3: when you say why pay attention earlier?
Speaker 2: Do you say somebody starts getting their superannuation around eighteen
Speaker 2: when they got their first full time job. Should they
Speaker 2: be in a balanced fund or in a high growth fund?
Speaker 2: Do you have any advice around that?
Speaker 3: Well, Advisers will often say when when you're starting off
Speaker 3: in your career, you know markets will correct. If they fail,
Speaker 3: they'll correct, they'll bounce back, so you can be a
Speaker 3: bit more aggressive you could choose a growth fund or
Speaker 3: even a high growth fund and get better returns. You've
Speaker 3: got all that time ahead of you to be a
Speaker 3: little more aggressive and have your super fun growing more.
Speaker 3: You know it'll accelerate things. Yes, so playing the long
Speaker 3: game when you say the long game, but they have
Speaker 3: you know, you have to be engaged to do that
Speaker 3: once again. But unfortunately people think it's all very boring
Speaker 3: and they'll worry about it later.
Speaker 1: Yes.
Speaker 2: Yeah, and a message to our readers, don't be those people.
Speaker 2: Be on it early and watch it, and you watch
Speaker 2: it grow. It's compounding interest.
Speaker 3: Absolutely, and come retirement you'll be grateful for being able
Speaker 3: to enjoy your retirement instead of worrying where the next
Speaker 3: penny's coming from. Now, why are the numbers so important?
Speaker 3: Take us through that. Okay, let's look at contributions. Your
Speaker 3: employer has to put eleven and a half percent of
Speaker 3: salary in come July. I'll go up to twelve. If
Speaker 3: you put a little bit in, just a little bit,
Speaker 3: it doesn't have to be terribly much. That will compound.
Speaker 3: In fact, putting in a little bit at the beginning
Speaker 3: of your work, you know your work life will have
Speaker 3: more impact than panicking right at the end and looking
Speaker 3: scratching around to put more money in, And then you
Speaker 3: have to be you have to be aware that if
Speaker 3: you put more money in, you're allowed to put in
Speaker 3: at currently sety thousand a year concessionally tacked super Now
Speaker 3: you have to take your employer's contribution, that's compulsory contribution
Speaker 3: into account. You can't go over that cap. So it
Speaker 3: has to be what you know minus what your employer
Speaker 3: has contributed, so you don't go over the cap.
Speaker 2: Why do you need to do checks on your existing
Speaker 2: super fun beforehand?
Speaker 3: You want to make sure you're in the right type
Speaker 3: of fund. How has it performed sort of? Has it
Speaker 3: been good at long term performance? Is it good in
Speaker 3: terms of service? We've got this huge cohort of boomers
Speaker 3: retiring and funds aren't well set up to service them.
Speaker 3: It's one thing when money's going in, but when they
Speaker 3: need to draw money out, it's a whole other matter.
Speaker 3: So how good is your fund in terms of even
Speaker 3: just service, not only performance, but service becomes very critical
Speaker 3: as well.
Speaker 2: Very good point. Yeah, on the homepage of every super fund,
Speaker 2: I'll have their performance. When't they over one, three, five
Speaker 2: and ten years? Is that correct, they do.
Speaker 3: This is another thing where engagement really matters. You know,
Speaker 3: how many people actually look at the tools and the
Speaker 3: help on their super fun They've got terrific app you know,
Speaker 3: even talk to them if you want to know how
Speaker 3: much you can contribute, phone them, ask them so that
Speaker 3: you don't exceed the cap. Ask them to explain what
Speaker 3: kind of fund you in. You know, how much exposure
Speaker 3: does it have to growth assets? You know, what what
Speaker 3: are they invested in? You can also look that up
Speaker 3: on their web pages.
Speaker 2: Yeah, and it's all simple. I see now with my
Speaker 2: own find it's all pie charts and graphs me to
Speaker 2: understand what they're investing. That's right, my money, and that's right.
Speaker 3: And quite often now they required to actually is list
Speaker 3: the actual investments that they investing in. You know, it's
Speaker 3: one thing just that giving you the asset allocation. It's
Speaker 3: quite another pinpointing the actual companies they invested in, or
Speaker 3: bonds or whatever it may be your property.
Speaker 2: That's when it gets deeply interesting, isn't it.
Speaker 1: Yeah.
Speaker 2: So yeah, there's no excuse to be disengaged because it's
Speaker 2: easy to be engaged.
Speaker 3: It's it's very easy to be engaged. I think you know,
Speaker 3: it's just that people think retirement is so far off,
Speaker 3: why bother? And it's all hunky dory because it's happening automatically.
Speaker 2: All right, So this isn't the kind of realm of fauxoh,
Speaker 2: fear of missing out and all those other acronyms that
Speaker 2: we know these days. Is it normal to worry about risks?
Speaker 3: It is after having been complacent, as the retirement deadline looms,
Speaker 3: people start to panic somewhat. And that's not ideal, you know,
Speaker 3: leaving it to then that's why at least ten years out,
Speaker 3: all right? Know what you're doing? What happens the day
Speaker 3: you retire? How do you roll your money over into
Speaker 3: an account based pension or whatever it is? There is
Speaker 3: no default fund in pension phase. You've got to choose, ah,
Speaker 3: all right, So you know, and do you want to
Speaker 3: be in that fund? Maybe the fund doesn't have a
Speaker 3: retirement product. Some funds, if you've got too lower balance,
Speaker 3: won't let you roll over into a retirement mode, will
Speaker 3: make you stay in accumulation. Yeah, some have minimums of
Speaker 3: up to fifty thousand, so you being.
Speaker 2: Taxed, Oh my goodness, all right.
Speaker 3: Those earnings will be taxed. So you know, people, they're
Speaker 3: the tiny little aspects that you have to become aware of.
Speaker 3: And when you do, you start you start educating yourself
Speaker 3: about the questions. You need to ask.
Speaker 2: What strategies can you use to mitigate the fallout if
Speaker 2: you haven't done the right thing? That sounds judgmental, I
Speaker 2: don't mean that if ten years out you haven't got
Speaker 2: enough money and you're super fun the kind of retirement
Speaker 2: that you want to have, what can you do?
Speaker 3: Well, Look, you know quite often people are coming into
Speaker 3: money because of inheritance, so look at that seriously. You know,
Speaker 3: could you can you put money in? The kids might
Speaker 3: want it, but then you know you've got they've got
Speaker 3: their whole life ahead of them. Given enough to the kids,
Speaker 3: have a look at making contributions then. And there's also
Speaker 3: something called a dance sizer contribution where you might be
Speaker 3: in the lead up to retirement and you want a
Speaker 3: smaller place and you might have cash left over and
Speaker 3: put it into your super But then again you've got
Speaker 3: to be aware of the caps the limits that you
Speaker 3: can place in, so you know, speak to your fund
Speaker 3: about it. The other thing is super funds have seminars
Speaker 3: that you can watch online or they might invite people
Speaker 3: over two physical ones. It's worth taking them up on
Speaker 3: that sort of thing. It really comes down to knowing
Speaker 3: what you're doing.
Speaker 2: As with everything, knowledge is power and that gives you choice.
Speaker 3: That gives you choice.
Speaker 2: Thanks so much for joining us, Veta. It has been wonderful.
Speaker 2: I've learned something as well. It is always good. Thank
Speaker 2: you for joining us this week on Friends with Money,
Speaker 2: and we'll be back next week.
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