Consolidate your super and save
If I offered you a year's pay for an hour or so of work, you would probably jump at the opportunity.
But many people unwittingly walk away from that opportunity when they maintain multiple super accounts. The end up paying extra fees and insurance premiums that significantly erode balances over time.
In this increasingly mobile economy, it's understandable that so many people have more than one super account. New accounts may have been established as you changed jobs, or you may work more than one job, each with their own super plan.
When it comes to boosting your super, however, one is the friendliest number.
Last year the Australian Productivity Commission estimated that a 21-year old with a full-time starting salary of $50,000 and an average insurance premium of $340 would have $833,000 in her super by age 67 if she has only one account. If she has multiple accounts, her final balance shrinks to $782,000, leaving her with $51,000, or 6% less, to spend in retirement. That's roughly equal to her first year's salary.
It's a common scenario. About one in three member accounts is an unintended multiple, according to the Productivity Commission, and they cost members about $2.6 billion annually.
And it's the compounding effect of these additional premiums and fees that really damage your super balance over time.
In addition to increasing your balance, consolidating your super accounts reduces your paperwork and makes it easier to track your super.
And it only requires a small amount of work.
(Keep in mind that while consolidating makes sense for most of those in defined-contribution plans, it is a more complicated decision for participants in defined-benefit plans. If you are in a defined-benefit plan, consult with an advisor to determine whether reducing accounts is wise.)
Before you consolidate, find out whether your super fund charges exit fees and review how any changes will impact the insurance you may have through super. Also, check whether changing funds will affect how much your employer contributes.
Then, look for a diversified, low-cost fund that matches your risk tolerance and time horizon. It may be a super plan you already participate in, or a new one you find by comparing funds.
Then, let your employer know about your decision. If you are not sure how many super accounts you have, you can find out and continue tracking your super with this tool from the Australian Tax Office.
Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
25 June 2019
vanguardinvestments.com.au
Hot Issues
- ATO encourages trustees to use voluntary disclosure service
- Beware of terminal illness payout time frame
- Capital losses can help reduce NALI
- Investment and economic outlook, August 2024
- What the Reserve Bank’s rates stance means for property borrowers
- How investing regularly can propel your returns
- Super sector in ASIC’s sights
- Most Popular Operating Systems 1999 - 2022
- Our investment and economic outlook, July 2024
- Striking a balance in the new financial year
- The five reasons why the $A is likely to rise further - if recession is avoided
- What super fund members should know when comparing returns
- Insurance inside super has tax advantages
- It’s never too early to start talking about aged care with clients
- Capacity doubts now more common
- Most Gold Medals in Summer Olympic Games (1896-2024)
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
- January - March 2015
- October - December 2014
July - September 2019 archive
- SMSFs attract younger members
- Heed restrictions on downsizer contributions
- Access to more resources and tools than most websites.
- Valuations key to avoiding NALI restrictions
- SMSF advice appetite strong, says ASIC
- For a smoother path to investment success, diversify
- How's Australia doing statistically?
- LRBA changes mostly affect Melbourne, Sydney retirees
- Lessons from the 2019 Index Chart
- The global economy at midyear: How our views have changed
- The biggest global corporations since 1998
- ‘Retrospective’ LRBA measures tipped to cause headaches
- Downsizer Super Contribution
- Keep track of how Australia is really ticking over.
- Insights from the 2019 Vanguard / Investment Trends SMSF survey
- What falling interest rates mean for investors
- ATO releases ‘welcome guidance’ on death benefit income streams
- Super growth reducing age pension drawdown
- Big four firm outlines new financial year checklist for SMSFs
- Asset allocation as you age
- Australia - the story goes on.
- Consolidate your super and save
- Critical documentation steps flagged with switching SMSF loans
- Good investment habits versus damaging biases
- Control considerations flagged with death benefit pensions for children
- Interest rate for SMSF loans set to rise under safe harbour terms