31% of Australians directly own shares. That means that only 31% of Australians have been affected by the stock market crash. Right?
Well, not exactly. In fact, most Australians will see an impact on their retirement savings thanks to the recent stock market crash. And before you say ‘not me’, have a think about this:
Where’s your superannuation?
Australian Super Funds
Most Australians have their superannuation invested in retail or industry super funds, and these funds invest directly in the global share market. Share markets around the world have been volatile lately, so if your super is invested in the Australian and/or international share markets, it’s likely you would have been affected by this.
Super is a long-term investment. The value of your super can change daily depending on how it is invested. Do you know how your superannuation has been invested? And, more to the point, has it been invested in your best interests or in the best interests of your super fund?
The value and performance of each investment option is linked to the underlying asset classes (types of investments e.g. shares, property, fixed interest etc) it invests in. Depending on where it is invested and whether it’s in a high growth strategy, your super is typically invested into one or more asset classes (typically Australian and international shares, property, bonds and cash). You may have experienced a fluctuation in your investment value which reflects the performance of the assets your super is invested in.
Taking control of your superannuation
Do you want complete control over your superannuation? A self-managed super fund (SMSF) may be good for you.
Let’s talk about control of your SMSF. You will be able to determine how you invest your super money whether it be shares, cash, property, or term deposits. Whatever it may be, the decision is really up to you.
You can decide if and when to buy or sell, you can react swiftly whenever there are changes in the financial markets. Ultimately, by having control over your superannuation, you become accountable for what happens to your retirement savings.
Investing in cash, you can manage your investments and contributions online. You will save a lot of money on admin charges and also have complete access to transactions, share prices, and current investments.
2. Free yourself from fees
When it comes to super, paying excessive fees is a common error people make, but this can be addressed. You can review the admin fees you pay on your super account and compare it with other similar super funds.
Have you had a couple of jobs in your career? If you changed employers and didn’t tell them your super fund details, chances are you will have more than one super account. Having several accounts will result in a double-up of admin fees, pointlessly draining your funds. Through the ATO, you can combine your super finds by simply using your Tax File Number to make sure you aren’t paying more in fees than necessary.
3. Make pre-tax super contributions
You can ask your employer to pay a portion of your pre-tax salary as an extra contribution to super; this is commonly known as a salary sacrifice. It can be tax-effective if you earn more than $37,000 per year.
4. Make after-tax super contributions
Simply deposit your personal money into your super. These are called after-tax super contributions because you have already paid tax on the money. This is different from salary sacrificing, which happens before your income is taxed.
5. Retirement risk zone – prepare for retirement
A previous CHOICE study that investigates how the Global Financial Crisis affected superannuation accounts concentrated on retirement risk zone – approximately 5 years before and after retirement – when your account is vulnerable to significant market drops.
A 10% downturn in the share market globally translates approximately in to a 5% drop in your superannuation account. The global share market has begun to downturn this year. So, it is all just a matter of how long it will take to make up for the loss.
Preparing for retirement as early as possible can go a long way to building up your funds; think long-term investments.
Put your super to work for you – and avoid the risk of another stock market crash
You should consider keeping the following things in mind when looking at your super and what’s happening in global markets:
Over time, the value of your super investment will go up and down, depending on market conditions. While it’s true that Global Financial Crisis’ can damage your superannuation savings, there’s no need to panic yet. There are many things you can do to secure a wealthy retirement for yourself. The best place to start is by keeping a cool head.
To make any positive changes to your super fund you need to understand what’s been going on inside it. Start your education by taking a good look at your own fund. Have you lost money recently? Are your fees very high? Take the time to compare your fund with alternatives – you might find you’re better off putting your retirement fund elsewhere.
Super is, by nature, a long-term investment; it’s the saving you make from as soon as you begin working until the day you retire. A good investment objective should focus on a 10-year period. Thinking long term may help overcome some of the short-term shortfalls your super fund may encounter. Long-term investment may include thinking about managing your own superannuation or investing in property where investments are less risky.
Make a plan
It makes sense to understand how much risk you’re comfortable with taking when it comes to how your super is invested. Build a plan and stick to it, though review your plan at different stages of life to make sure it still meets your needs.
“Save yourself the stress of what another stock market crash could do to your superannuation funds”
To determine if your financial plan is still meeting your needs, seek the advice of a financial planner. With a well formulated plan you are better placed to withstand periods of volatility.
If you are seeking a long-term investment for your retirement fund but aren’t sure where to turn to for advice, come and see the experts here at Safe Super Homes. We have been in the SMSF property investment industry for over 26 years and can offer safe, affordable investments to help you achieve a comfortable retirement. Get in touch today and save yourself the stress of what another stock market crash could do to your superannuation funds.