Yes, You Can Still Grow Your Super, Even At 50
I am a 50-year-old recently divorced woman with $50,000 in my superannuation fund. In the 15 years that I have left before retirement, how can I build this into something meaningful that will enable me to be financially independent in retirement?
Karen, Spring Hill, Qld
For some women there’s a bit of embarrassment about their super. They think, “I don’t have enough, so I’m not good enough.” My advice is to stop looking backwards and stop the comparisons. This is a time to make the most of what you’ve got – and a time to act. Draw a line in the sand and say, ‘This is where I am and this is what I have to deal with.” Then look at the levers available now that could have an impact on your super balance over time.
WHAT TO DO
Save more and often The money you put in now has time to compound and grow. There were some changes to the superannuation legislation a couple of years ago that helps women catch up. If you didn’t make the concessional contributions up to the maximum $25,000 last year, then you can make up for it in this year.
Do all you can to reduce super fund costs The average costs are
1 per cent, but I see a lot of people who pay more than that. You may be better off changing to a new super fund. Or within your existing fund you may find that changing the underlying investment options might reduce the fees. You can do this without having to change super funds. Some funds have an internal advisor who can help. Either way, phone up and ask them exactly what fees you are paying. If you are in an older retail fund, you may find that you are paying far higher fees than you really need to be.Stop paying life insurance premiums that you don’t need There is often default life insurance with super funds. If you are a 50-year-old divorced woman with no dependents then you might find that you have default life insurance that you just don’t need. Insurance is for the people you leave behind, not for you.
Choose to work longer Think about sustainable working: how do you transition to a job that is less demanding so you can work longer and still make a living? This will have a double whammy effect on your wealth. If you are still earning an income, you can use it to help cover your expenses. You also won’t have to use as much of your super savings, and your super can stay invested and continue to work for you.
WHAT NOT TO DO
Increase your investment risk I don’t recommend choosing a riskier superannuation investment option than you are comfortable with, just to try to get more return. The risk isn’t worth the discomfort.
Open a self-managed super fund Unless you have a substantial super balance, SMSFs are low on impact, low on ease and high on fees. Also, when you start an SMSF you are a director of a trust and you have full director responsibilities, which has its own set of challenges.
Kate McCallum is a financial adviser and author of The Joy of Money.
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