At the risk of sounding incredibly rude and channelling the former US President, Bill Clinton, I have some advice that’s powered by at least a million reasons: “Find your super statement and read it, stupid!”
This is the advice I gave a couple of hundred workers earlier this week, who I spoke to at a lunchtime meeting. Of course, I didn’t call them “stupid” but I did leave them with this nagging question: Why would any rational person ignore their (potentially) unbelievably rewarding super?
Unfortunately, here’s a super story that too many people will ignore primarily because too many Aussies find the idea of being a millionaire or not being a millionaire inexplicably boring. And that could be the consequence of ignoring the latest assessment of our super funds by the Australian Prudential Regulation Authority (or APRA).
That’s right, most young Australians, if they remain in work and get their compulsory super into a good super fund, which doesn’t overcharge, are likely to retire with more than a million dollars in their too-often-ignored super funds.
But what’s a good super fund?
The answer to this question really does vary on how much risk you’re prepared to take and for how long. We advisers think the younger you are, the more you should be in growth-oriented super funds. As you get older, you go to balanced and head towards more conservative as you get closer to retirement.
To the group of pretty normal people I was talking to, I put to them the funny idea that “this evening, go home and if you live with a partner, say to them that you don’t want evening drinks or a swim, instead you want to search for your super statement and then we’re going to read it!”
I added: “If you live by yourself, go home and tell yourself what you’re going to do and then damn well do it!”
Yep, this brought a laugh, which isn’t bad for an economist doing super!
If you want me to give you a ballpark number to make your assessment of your super fund, you should look for the cost. Different funds might have a different name for the cost and they can be called an MER or marginal expense ratio and it should be under 1%.
Australian Super charges around 0.85% and this has been a good-performing fund over time.
Looking at a fund’s performance for one or even two years can be misleading, so you should look at websites such as Super Ratings or Chant West, where they show you the best-performers over a number of time periods.
If your fund is in the top performers group over at least five but better still 10 years, then you’re probably on a winner. But once you learn how to assess your fund, keep monitoring its performance.
If you’re in a growth-oriented fund, your average performance should be 8% plus. A balanced is around 6-7% and the more conservative option could be around 4%. They’re my guesstimates.
Unfortunately, different funds have different definitions of growth, balanced and conservative but mastering these issues could come when you teach yourself to become a super expert. And that’s what all rational people should do.
To be stuck in a high cost and low performing fund could mean you’re robbing yourself of hundreds of thousands of dollars and you might stop yourself from retiring with a million dollars plus in your super fund.
I’ve always comically argued that if anything is worth doing, then it’s worth doing for money. And there’s a lot of super money to be made or lost by getting up, close and personal with your super.
The worst-performing funds, according to APRA were:
If you want to become your own super expert, then having a look at your statement, then APRA’s website. And then check out other super websites such as Super Ratings and Chant West.