SUPER ADVICE: Superannuation shines, but contributions are fading.
SUPER ADVICE: Superannuation shines, but contributions are fading. alfexe

Help your super shine by getting to know it better

THE end of the year can be a cash squeeze. But it's also a good opportunity to take stock, and budget permitting, grow your super.

Figures from research group SuperRatings show Australians have tightened up their voluntary super contributions over the last 12 months. Maybe the sharemarket highs of 2017/18 have seen us take a breather from actively growing our super, but the average voluntary contribution over the course of 2017/18 was just $1054. That's 10 per cent less than the previous year.

Super funds have seen a short term pullback in recent weeks, when a major market sell-off impacted fund returns. In the first two weeks of October alone, the Aussie sharemarket fell 4.8 per cent. Just how much your super balance felt the squeeze depends on how your nest egg is invested; the greater the exposure to shares, the more your super savings will feel the hit.

The thing is, the vast majority of Australians have their super in a balanced style of fund, where your money is spread across a large range of asset classes. The result according to SuperRatings is that $100,000 of super invested in a balanced option would only have dipped by 2.7 per cent following that 4.8 per cents haremarket fall. This reflects the benefits of a diverse portfolio.

The bigger picture is that our super has generally enjoyed a good run in recent years. Balanced funds have delivered a median return of 9.7 per cent over the year ended September 30, 2018, with 5-year gains of 8.3 per cent. Not a bad result at all.

Good times should never be taken for granted when investing, and while market dips are likely to impact your super balance, superannuation is, for many Australians, a very long term investment. There is usually ample time for your fund to recover any lost ground.

Past returns are never a guide for the future, but $100,000 invested in the median balanced fund 10 years ago could be worth anywhere from $156,000 to $213,150 today depending on how your particular fund performed. It goes to show that compounding returns really can work magic over time regardless of short term lows.

It's not a bad idea to use the summer break to get to know your super. If you can, add a bit extra to your super savings - you'll be glad you did when retirement rolls around.

Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

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