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Why super should be one of your New Year’s resolutions

Why super should be one of your New Year’s resolutions

Three changes you could make to your super to make it an effective New Year's resolution.

With the start of the new year you might be thinking about the future and any positive changes you can make for the year ahead.

Making a New Year’s resolution can be easy, but following through can sometimes be challenging – especially if it’s difficult to see the incentive.

Making a decision to look after your super can be different. A little change now has the potential to make a real impact in your future – in fact, it could be one of the smartest ways to start 2018.

Three things you can do that could make a big difference:

  1. Choose a super fund that’s right for you
  2. Consolidate your super
  3. Make extra contributions

Choose a super fund that’s right for you

Finding a super fund that suits you might sound obvious, but 56% of 18-39 year olds go with the default option provided by their employer1. The good news is this number is coming down (it was 65% in 2016) as more young people take an active interest in what’s happening with their money.

When choosing a super fund, look closely at the fees you’re paying. ASIC’s MoneySmart website suggests a 1% difference in fees now could contribute to as much as a 20% difference in 30 years’ time2.

MoneySmart also says:

“Choosing a super fund is a bit like dating. Pick the right fund and you'll be set for a long, happy and comfortable life when you retire. Set your sights on the wrong one and you're in for a world of pain3."

Consolidate your super

For every job you’ve had, you could have super that's in a different fund. You can choose to bring all your super together into one fund, but you need to find it first. The Australian Taxation Office offers a service that can help you find any lost super – you just need to register for MyGov to use it.

If you do decide to combine all your other super into one account, it makes sense to consider if you can replace any insurance cover you might lose and whether there are any costs, risks and tax implications from consolidating4.

Make extra contributions

Making extra contributions to your super can be tax effective and give your super balance a boost. The earlier you start making these contributions, the more time they have to accumulate – over 30 years, a relatively small amount like $20 a week extra may make a real difference. Get an estimate of the impact you could see in your super balance when the time comes to retire by using MoneySmart’s superannuation calculator.

It’s also possible to get co-contributions from the government. People earning up to $51,813 a year can qualify for government co-contributions, and the amount you’re eligible for will vary depending on how much you earn5. If you earn less than $36,813 a year and you contribute $1,000 extra per year to your super, the government will put in the maximum co-contribution amount of $500.

1. Source: Investment Trends 2017 Member sentiment and communications report 

2. Source: “Super fees” https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-fees

3. Source: “Choosing a Super Fund” https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/choosing-a-super-fund 

4. Before you make a decision on consolidating your super, you should compare the costs, fees, risks and benefits of your other super funds. Consider whether you can replace any insurance cover you may lose upon rolling over and potential costs for withdrawing from other super funds, as well as any investment or tax implications. You should also decide which super fund you want your employer to pay your future employer contributions to and complete a Super Choice form if necessary.

5. Source: ATO https://www.ato.gov.au/individuals/super/in-detail/growing/super-co-contribution

Remember, before you make a decision about your super, you should compare the costs, fees, risks and benefits of super funds. It makes sense to consider whether you can replace any insurance cover you may lose when you bring your accounts together, as well as any costs for withdrawing from other super funds and any investment or tax implications. This article is intended to provide general information only and does not take into account your individual objectives, financial situation or needs. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. The Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law. Information in this article is up to date as at the date of publication.