Is your super fund driving the return you need for retirement?

Are you between 45 and 55? If so, retirement isn't just a distant dream anymore—it's approaching fast. Now's the perfect time to take a hard look at your superannuation and ask yourself if it's really on track to give you the retirement you want.

According to the latest figures from the Association of Superannuation Funds of Australia (ASFA), to enjoy a comfortable lifestyle at 65, couples need about $72,148 a year, while singles might need around $51,278. And all this assumes you're in good health and have paid off your home.

But what if you're still paying off your mortgage when retirement rolls around, or your super balance isn’t measuring up? Many Australians nearing retirement realise too late they might not have enough saved up.

So, don’t let this be you. Together, we’ll explore how you can bolster your super and ensure it’s performing well enough to support the retirement lifestyle you’ve envisioned.

Evaluating super fund performance

Let's take some time to analyse how your super fund has been performing. Your annual statements should provide your funds rate of return for the past 1, 3, 5, 7, and 10 years.

You can then benchmark it against industry averages, which you can find through the Australian Prudential Regulation Authority (APRA) , as well as third-party research firms including SuperRatings and Chant West.

Here’s an example: let's assume your super fund is Australian Retirement Trust (ART) , and you’re invested in their ‘Super Savings Growth’ option, which is made up of 85% growth investments for their higher reward potential and 15% defensive investments to limit some of that risk. Here’s how it performed compared to other similar funds in the last few years (these similar funds contain anywhere from 81-95% growth investments):

* Source: ChantWest Super Fund Performance Survey, March 2024. Returns are for periods to 31 March 2024. Returns are shown net of investment fees and tax.

Remember, historical performance isn't a reliable indicator of future performance. While past success can offer insights into a fund’s management, it shouldn’t be the sole factor in your decision-making process.

It’s also worth noting that ‘growth’ funds like the ones displayed above are usually considered more risky than balanced or conservative/defensive funds. See the section below on Strategic Investments to understand the risk vs. reward dynamic.

Impact of fees on your super

Don't underestimate the impact of fees on your superannuation! Fees are unavoidable, but what you want to avoid is excessive fees. Typical fees you'll likely encounter are admin fees for basic account management; investment fees for the expertise of the fund managers who invest your money; and transaction fees for the behind-the-scenes costs of buying and selling investments on your behalf.

But what is a reasonable level of fees? Using ATO tools , we examined the fee structure of 60 My Super products, which are the default low-fee super products provided by most major funds. These are typically chosen by your employer for individuals who don’t make a selection themselves. 

According to this data, based on a $50,000 balance, the majority of these products charge between 0.75% to 1.25% of your balance annually for the types of fees mentioned earlier.When choosing a super fund, you’ll want to take fees into account, in relation to returns, and avoid fees on basic stuff like joining, leaving, or changing your investments. These fees might seem small, but they eat away at your hard-earned retirement savings.Also look for funds that have a transparent and clear fee structure.

Maximising returns through strategic investment

Most super funds offer a variety of investment options with varying levels of risk and potential reward.  What they're investing in – whether it's exciting individual shares,  stable-but-not-thrilling government bonds, or a combination of everything –  is what determines that risk/reward balance.

It's generally agreed that younger investors can handle riskier investments, aiming for greater long-term growth while they have time to ride out market fluctuations, while those nearing retirement would benefit from more conservative options. A good rule of thumb is to look for funds that offer several investment options.  This allows you to adjust your mix over time as your needs and risk tolerance change. Even better, some funds let you split your money between different options.

The benefits of making additional contributions

If you have some disposable income, personal super contributions are a great way to supercharge your savings. They’re a no-brainer for anyone who can make it work, but it’s especially handy for those nearing retirement since you won’t have to wait as long to access those funds.

You can contribute up to $27,500 each year before taxes, which includes what your employer pays in. These concessional contributions help lower your tax bill now, add more to your retirement pot, and are taxed at a lower rate as they grow.

On top of that, you’re allowed to add up to $110,000 after taxes as non-concessional contributions. These don't cut your tax upfront, but they do grow in a tax-favourable environment, meaning you could see your savings increase more quickly.

There’s also the Downsizer Contribution. If you’re 55 or older and you sell your home, this contribution lets you shift a big chunk of the proceeds directly into your super, offering some additional tax advantages.

* From 1 July 2024, these amounts will increase to $30,000 for concessional contributions and $120,000 for non-concessional contributions.

Importance of professional financial advice

We should probably take a moment to stress the importance of solid financial advice. If you can’t decide whether you should switch, or you feel overwhelmed by the options, an independent financial advisor can work with you to understand your unique situation and help you make an informed choice.

And did you know that many super funds offer their own financial advisory services? You probably wouldn’t ask them which fund you should join (they’ll naturally recommend their own), but they can help you with a host of other decisions like which investment mixes you should choose, how to maximise your contributions and how to plan your transition to retirement.

For example, ART membership includes free financial advice offering:

• Reviewing your investment strategy
• Growing your super balance
• Contribution strategies
• Accessing your super
• Understanding your insurance options

If you're a member, you can easily book an appointment here .

Also, don't overlook the resources on your fund's website. You might find helpful calculators, educational articles, and other tools that give you a clearer understanding of your superannuation options.

Bottom line

Sorting out your super might not be the most thrilling task on your to-do list,  but think of it this way: the choices you make now can make those retirement years a whole lot smoother. 

A fund that's easy to understand, has your back when you need help, and earns your hard-earned money the returns it deserves... that translates to less financial worry and more freedom to enjoy the life you've built.

If you’re currently on the lookout for a new super provider that ticks all these boxes, check out Australian Retirement Trust.