All of us want to enjoy a stress-free retirement. A retirement where money isn’t an issue and all of your expenses are covered. In the past, many folks have been a little laid back when it comes to how they handle their retirement since the federal government has created super funds as a way for us to gradually build a retirement fund as we work. However, unemployment insurance, and income protection insurance have jumped to the forefront of people’s minds with the recent advent of COVID-19 cutting into our savings and halting our ability to earn. Choosing the right super fund can help cushion you through hard years like this one, and keep you on track for that stress-free retirement you’ve been dreaming of.
1. Start with the basics
Most young workers don’t pay much attention to all of the forms they have to fill out at the beginning of their first job, but it’s worth taking a second look now. A superannuation fund or “super” is a mandatory fund put in place by the federal government to help people grow their wealth for when they retire. A super covers three main areas: Life Insurance, total or permanent disability income insurance, and income protection insurance.
Both you and your employer help pay the insurance companies that handle your super account, and upon retirement, they can pay up to 75% of your monthly income in a timely manner. If handled properly, superannuation is a reliable way to ensure you have safe and steady income protection, but not all super accounts are created equal, and you have the luxury of being able to choose what kind of fund you want to pay into. So if you don’t know, be sure to call your employer and ask about where you can find more information on your super fund today.
2. Talk to your friends and family
The easiest way to start learning more about super funds and what type of fund might be the best for you is to talk to your friends and family. They can give you specific advice based on your medical history, career choice, and any specific disability benefit or disability income you may need.
Don’t be nervous if you feel you are uneducated on the subject, everyone needs to start somewhere. Having friends and family with a little bit more experience to help push you in the right direction helps take away some of the anxiety around starting, as well as clear up any confusion you might have.
3.Learn about the different kinds of funds
Choosing a super fund can be incredibly overwhelming at first. There are so many different kinds of funds that it might seem impossible to figure out where to even begin. But before you get lost in the myriad different options of funds out there, let’s focus on the major kinds of funds.
There are six kinds of super funds: Your default super, a retail fund, an industry fund, a public sector fund, a corporate fund, a self-managed super fund, and a defined benefit super fund. Each of these six major funds varies in cost, annual rate, and certain restrictions. As you are choosing your super fund, focus on these six, and ask yourself which fits best with your career and your individual retirement goals?
4. Narrow Your Focus
Now that you’ve got a basic grasp on the different kinds of funds, it’s time to start eliminating options to decide which fund will be the best income protection insurance for you. The best way to do this is to know what you don’t want and start from there. If you trust your current employer to handle your income protection insurance, the best option for you would probably be your default insurance policy that comes with your employer’s super account. However, if you are an aggressive investor then a self-funded super fund will be a better choice.
Make sure that you don’t get held up by option anxiety. If you need any help, there are amazing companies such as iSelect, that can help you find which fund is best for you.
5. Compare Fund Performance
Another important factor to consider when choosing a fund is its overall past performance. Although this will not predict the future performance of a fund, it will help give you a guiding light by which you can narrow your search by cutting out low performing funds. You can compare income protection service with iSelect to see which funds perform the best overall.
You also have three different options considering how aggressive you want to be when investing. Your most aggressive option is the Growth Option. The best way to think about the Growth Option is “high risk, high reward.” This option is best for young workers who have time to recover from volatile market drops. Your other two options are a Balanced Option and a Conservative option, and these work exactly how they sound: decreasing in risk but also decreasing in reward the safer they get.
6. More research could mean more money
Most experts agree that the earlier you begin doing research on your super fund, the more chances you have to increase your overall earnings. A good way to think about this is “learning leads to earning.” As you grow and develop so will your earning capacity and so will the super fund that is right for you, so be sure to check in on your fund at least once a year and every time you get a promotion or make a change in careers.
7. Start Investing today
Now that you’ve learned the basics of how to get started with choosing your super fund, there is nothing stopping you from getting out there and taking the best option available to you. Remember, the earlier you start the more aggressive you can be, which means the more money you can make. So, what are you waiting for?