A lot of people don’t give investing super the priority and consideration it deserves – it’s just working away quietly to provide you with an income to live on in retirement.
There are a few reasons why it’s so important to get your investment strategy right. To put it bluntly, your future self will one day depend on it.
It’s one of your largest assets
Super is right up there when you think about what your biggest investments are. In fact, after the family home, it’s probably your biggest asset, so should be treated accordingly.
If you were to invest in shares, you’d be doing it with the objective of increasing the value of your portfolio, right? Well, the same goes for your super. When you realise that super is an investment in your future, you’d have to agree that it’s important to be strategic about how it’s invested.
It’s invested for a long time
For most people, their super is invested for a long time (between 20 and 40 years!).
One of the key things you can do is get your investment strategy right and make an active investment choice for your super, because how it’s invested directly impacts your future income down the track. Unfortunately, many people don’t even tell their fund how they want their super invested, which means that it ends up being invested in the default investment option, which may not be how you want your super invested.
Most people have a long investment timeframe (that is, how long before you can access your super), so they can invest in in higher-growth options that will see their account balance grow the most over time. And while there will be periods of negative returns from time to time, overall you’ll benefit from positive returns. And over time, that really adds up.
Even better still is the valuable phenomenon of compounding returns. Because super is invested for such a long time, you’re positioned to benefit from years of compounding returns. Your super is an investment that accumulates over time with ongoing contributions and investment earnings, your investment earnings are re-invested in your account and you again receive earning on your earnings in additional to your account balance – so your total return grows more and more rapidly over time.
Your money needs to keep working – even when you stop
Most people think about their super investment only until retirement, and that couldn’t be further from the truth. It’s important to realise that your money doesn’t stop working once you do.
Retirement will probably last a lot longer than you think. In fact, on average we spend around 25 years in retirement, so it’s important that your money continues to provide investment returns even when you’ve stopped working. As a general rule of thumb+, your retirement income is made up of 10% contributions made during your working years, 30% investment earnings before retirement and 60% come from investment earnings in retirement. The lesson to learn here is that our money has to keep working for us in retirement.
And because we’re living longer than ever, it’s important that your money continues to provide investment earnings to go the distance.
+ Russell Investments 10/30/60 Retirement Rule is based on a balanced-style portfolio made up of approximately 65% shares and 35% bonds, and assumes contributions made from age 25 to 65, with 25 years in retirement.
Get professional advice regarding your investment strategy
Because the importance of investing your super the right way can’t be understated, it’s worthwhile speaking with a financial planner to make sure you get it right. They can help you work out the best way to maximise your returns, and all it takes is a phone call.
Call 1800 757 607 to speak with a financial planner.
The information on this page has been issued by Maritime Financial Services Pty Limited (MFS). It contains general information that doesn’t take into account your individual objectives, financial situation or needs. It’s important to consider how appropriate this general information is in relation to your situation before making an investment decision. We recommend that you seek financial advice before making any decisions regarding your super or investments. The information on this page is current at the time of publishing.