finance

It's your money: 5 things you should know about super when starting your career.

QSuper
Thanks to our brand partner, QSuper

When it comes to super, for most of us, it’s not something we think about until landing our first ‘real’ job. Maybe not even then either.

Sure, you might’ve accumulated some super while working part time through school and uni, but it’s not until you’re on the front step of your shiny new career that you start to think it might be important – especially when your employer starts talking to you about your salary package.

So what do you really need to know about super to set yourself up for success in the long run? Mamamia spoke to Damian Lillicrap, the Head of Investment Strategy for QSuper, who is also known as the Bare Naked Economist, to find out the best actionable tips when you’re starting out.

1. What do I need to know about super when starting out?

The first thing to note is that for most people their super, along with their house, will be one of their largest two assets. It’s too important not to do a little bit of homework about, as you would a new house, says Lillicrap.

There are a couple of things you need to consider when you first start contributing to super: 1) how much you will contribute, and 2) the investment performance you receive after fees. These will be the two biggest factors that determine how much money you accumulate for retirement.

If you can contribute a bit extra to your super above the minimum, say 2 per cent to 5 per cent of your salary, this will significantly improve what you have waiting for you later in your life. So, doing this when you start a full-time job is a great idea.

One hot tip about extra contributions: if you’re earning under $37k you can get the government to make contributions (more info on the ATO’s website).

Another trick? Don’t just compare fees on face value, as these are all based on an assumed balance that may not be the same for everyone.

“When comparing funds, work out what the relative fees are on your actual account balance,” Lillicrap tells Mamamia. “A trap for first-timers can be that some funds charge you a set dollar fee component as well as a percentage on your total balance. If you have a small balance, this can work out to be quite a large percentage cost.”

QSuper is an example of a fund that only charges a percentage on your total balance, so their members don’t need to pay a set dollar fee.

"Work out what the fees represent in terms of a percentage of your account balance." Image: Getty.
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You'll hear about super funds talking about 'returns' – the money you make from your investment. ASIC's MoneySmart guide can help you judge how well your super fund performs, and how positive the returns are for you.

From his experience, Lillicrap says it's better to look at longer periods of time when comparing funds, as opposed to year to year. However, "past performance may not be indicative of future results", he warns.

It's helpful if your super fund has an investment strategy that's less risky, like QSuper's approach, which is to ensure less ups and downs in the returns you get.

"If you look up our 10-year returns you will see that lower risk has not stopped us from getting great returns," Lillicrap adds.

Finally, when researching super, you may also want to consider the insurance your fund likely offers. This may include death and total and permanent disability and income protection insurance.

Looking into insurance may not sound fun, but understanding what you are entitled to if something goes wrong can be reassuring, and if you decide that you don’t really need some of that protection then you might be able to save some money by opting out of those elements.

2. What about super I've accumulated along the way through casual or part-time work? 

If you've been working since you were a teen, it's likely you'll already have some super accumulated. So consolidating all your super into one place can be a great idea.

"It ensures you’re not paying excessive fees, means less paperwork, helps you keep track of your super and can help you avoid excess insurance costs," says Lillicrap.

There is currently around $17 billion of ‘lost’ superannuation sitting with the tax office, which is largely money that workers have lost track of. Yes, you read that right. And some of it could be yours, so it's definitely worth keeping on top of.

You can check this on MyGov or your super fund can do a check for you and organise the consolidation into one account.

3. What's the best super investment option if you're just starting out?

Every fund has a default option. And according to Lillicrap, it's often the "Balanced Option".

You can try and work out how to construct a diversified portfolio or you can let the experts construct one for you. You wouldn’t try to build your own house unless you had the skills, right?

QSuper's default is called Lifetime. It uses your age and account balance to set a more personalised investment strategy that means you don't have to change it as you get older.

Do your research, reap the benefits. Image: Getty.
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4. What if I take time out to raise a family, but still want to grow my super? 

Now this may not be top of mind for a lot people when starting out their careers, but it could be something you're planning for down the line.

For women especially, it's important to take an interest in superannuation and how it can work for you if the time comes when you want to start a family.

"Continue to review your insurance and take advantage of tax office bonuses and rebates," Lillicrap says. "Treat it like an online bank account that you just can’t touch right now.

"For example, if you have a partner you may be able to receive a spouse contribution rebate or a co-contribution."

If you are making after-tax contributions into your super, you can now claim a tax deduction on this.

And if you are part of a couple, remember that partnership should extend to super, and legally it does. Also, costs in retirement are less per person in a couple. So consider your full situation, it may be more rosy than simply considering just your own super in isolation.

5. Should you stick with your employer's fund or do your research and switch?

If your employer gives you a company car to drive, your view of the type of car may not be important, but you don't want to end up in a tuk-tuk if you need a four-wheel drive.

Your super is going to be such a big asset it's important to select the fund that's right for you. As Lillicrap tells us, "when you find a great fund you can simply keep it when you change employers".

Lillicrap adds that the biggest regret people usually have about their super is not thinking about it sooner and not making voluntary contributions earlier in life. Like most things, the few hours you put into researching super will produce the greatest benefits.

So, the best thing to do is start doing something early. You won't regret it later.

This content is brought to you with thanks to our brand partner, QSuper.

QSuper

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