For many Australians, outside the family home, superannuation is likely to be one of the largest assets they will ever own. Yet it is also one of the most overlooked and neglected assets. Default, set-and-forget arrangements are designed to cater for large groups of members, but they may not reflect your age, income, family situation, risk appetite or retirement goals.
Across the Australian superannuation sector, millions of members are invested in MySuper products, which are generally used where a member has not made an election with regards to their superannuation. Many members also select a pre-mixed investment option. These options can be appropriate for some people, but they are not necessarily tailored to each person’s individual circumstances.
A default superannuation investment option or strategy built for the “average” person may not be well suited to your personal situation, either now or as your circumstances change. If your superannuation is left unmanaged for long periods, it may become misaligned with your longer-term lifestyle and retirement goals. Waiting until retirement to review it may also limit the range of options available to you.
Working with a financial adviser can help align your superannuation with your goals and preferences and ensure it is reviewed as your life changes. This can include reviewing your investment options, contribution strategies, insurance arrangements and retirement income objectives. A good adviser can also act as a disciplined sounding board, helping you avoid rash or emotional decisions that could prove costly over time.
The limits of a one-size-fits-all approach
A default super option is designed to be broadly acceptable and to provide a protective framework for a large group of people. For some members, that may be entirely appropriate. However, it may not be optimal for you as an individual. A default superannuation strategy does not automatically account for your unique situation and circumstances, and as your life changes over time, the gap between the default setting and what may be more appropriate for you can widen.
Your superannuation may not be invested with a level of risk that suits your timeframe or comfort level, or it may have more exposure to a particular asset class than you realise. It may also be misaligned with your broader retirement plan and life strategy. For example, what return objective does your superannuation need to achieve, and is your current strategy likely to support the lifestyle you want later in life?
Over a working life of 30 or 40 years, the gap between “broadly acceptable” and “right for you” can become significant.
The value of a tailored, structured strategy
A financial adviser starts with you: your goals, your lifestyle, your timeframe and your tolerance for risk. From there, we can build a structured strategy designed to help you move towards the life you want. In practice, that can mean:
- Aligning your investment mix to your goals and the time you have to reach them.
- Reviewing contribution strategies to make the most of your circumstances.
- Connecting your super with the rest of your financial picture, so everything works together, including wealth protection and personal insurance requirements.
- Reviewing your strategy over time so it remains appropriate as your circumstances, legislation and market conditions change.
The result is a plan with purpose, refined over time, rather than a product or strategy chosen by default.
A strategy that flexes with your life
Your needs at 35 are not your needs at 55. Careers change, families grow, markets move and goals evolve. A tailored, advised approach can be reviewed and adjusted over time, flexing to your short, medium and long-term priorities and needs. A set-and-forget arrangement, by contrast, may stay still while your life keeps moving, meaning what suited you a decade ago may no longer be the best fit today.
The hidden cost of emotional decisions
Some of the costliest financial decisions are made under stress or in reaction to unfavourable news. When markets fall, the instinct to switch to cash or “wait until things settle” can lock in losses and disrupt years of careful saving. Acting on emotion, headlines or short-term noise can be a significant threat to long-term wealth. A good adviser provides discipline and perspective, helping you stay the course and make decisions based on your plan rather than short-term fears.
Your superannuation deserves more than a default setting. To learn more about whether a tailored superannuation strategy may better suit your circumstances, contact the IWP team.