Regardless of your age, one of the ways to help you grow your wealth and prepare for retirement is to take an active interest in your super sooner rather than later. A good place to start is with some simple housekeeping. If you have multiple super accounts weigh up the pros and cons and consider the impact this may have on your end ‘retirement nest egg’.
Written and accurate as at: 10 Oct 2016
Regardless of your age, one of the ways to help you grow your wealth and prepare for retirement is to take an active interest in your superannuation sooner rather than later, especially when considering the impact that having multiple superannuation accounts may have on your end ‘retirement nest egg’.
You’ll notice from your superannuation statement, that your super grows from contributions and returns less tax and costs (such as contributions tax, administration/member fees, investment fees, adviser fees and insurance premiums).
With this in mind, consider what impact several sets of deducted costs may have on your overall superannuation balance if you have multiple superannuation accounts running simultaneously. Not to mention all the extra paperwork come super statement time.
As at 30 June 2019, over 14.8 million Australians have a superannuation account* – great news for people looking to have a lifestyle above what is provided by Age Pension entitlements! But did you know that almost half currently hold their superannuation in more than one fund? What’s more alarming is that many of these people are nearing retirement in the 61 to 65 age bracket. That could mean they may have been paying duplicate sets of costs throughout their working life, potentially reducing their ‘retirement nest egg’!
Fees aside, it is also important to be aware of how this impacts asset allocation. In many instances your additional superannuation accounts may have been established under what is called a ‘default investment option’, which in some instances coincides with a balanced investor, on average this equates to roughly 70% growth assets (such as shares and property) and 30% income assets (such as cash and fixed interest). You might find that this is exactly how you would like to be invested based on your financial goals and objectives and risk tolerance. But if the default investment option does not align with your needs it may mean that you’re not getting an optimal result from your superannuation.
Before you go rolling one superannuation balance into another it is important to understand that in some instances it may make sense to retain multiple superannuation accounts. For example, you may be in a position where: one superannuation account needs to be retained with the minimal account balance because you have personal insurance cover within it that was established prior to a medical condition developing; whereas, the other superannuation account is receiving your personal and employer contributions due to its potentially better quality investments.
If you are unsure about which path to take, then remember it is ok to seek professional advice from us before you consolidate your accounts because we can help you make an informed decision regarding fees, insurance offerings (and insurance cover established prior to medical conditions), defined benefit schemes, as well as diversification, risk tolerance and much, much more.
Lastly, as at 30 June 2019, there were roughly six million lost and ATO-held superannuation accounts with a total value of roughly $16 billion*. Is some of it yours? Call us today if you have any questions.
*Australian Government, Australian Taxation Office. Super accounts data overview. Retrieved from: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview/