Looking long-term: 4 ways balanced super helps you reach your retirement goals
Balanced super products can provide long-term returns that help you get the retirement you want.
Sponsored by Australian Retirement Trust. As one of Australia's largest super funds, with more than two million members, Australian Retirement Trust can help you achieve the retirement you're looking for.
On 1 July 2023, the superannuation rate increased from 10.5 to 11%.
While an increase of 0.5% doesn't sound like much at face value, over time it can make a significant difference to the funds you have available at retirement.
With this in mind, many Australians are now weighing up whether their super fund is meeting their needs.
So today, we're going to take a look at how balanced funds can help you reach your retirement goals.
What is a balanced fund?
There are subtle differences between products from every superannuation provider, so it's important to take a close look at the specifics before you join up.
However, there are some common characteristics that can be applied to most balanced funds in the market. A balanced fund should:
- Feature a blend of growth and stability, without sacrificing one for the other.
- Include a portfolio with a variety of assets (e.g. shares and bonds) to minimise exposure
- Provide long-term returns that position the fund ahead of inflation
- Manage risks effectively
One example would be the Balanced option in the Super Savings product from Australian Retirement Trust.
This consists of two accounts: an Accumulation account, which enables you to save, and a Super Savings Retirement Income account that is designed to provide access to funds once you're transitioning into retirement.
Preparing for retirement with a balanced option
"It's important to remember that super is a long-term investment," says Ian Patrick, CIO at Australian Retirement Trust.
Fluctuations may occur on a year-to-year basis, but Patrick explains that the important thing is that investments are trending upward overall.
A balanced option can yield impressive returns from an investor perspective.
Patrick points to Australian Retirement Trust's Super Savings product as an example.
During the 2022-23 year, the Accumulation account's Balanced option achieved a return of 10%1. During the same period, the Income account returned 11.1%.
Over the course of the prior decade, the Balanced option also achieved an average return of 8.4% per year.
Although it's always important to remember that past performance isn't necessarily indicative of future performance, it can still be worthwhile looking for a super fund with a proven track record.
There are 4 primary ways that balanced super products can help you prepare for retirement.
1. Wealth accumulation
In many ways, superannuation is akin to a savings account. You stash away funds with the aim of accessing them when you need them.
However, your superannuation is more dynamic; it's actively invested, allowing your funds to grow over time.
Super products like the Balanced option in the Super Savings product from Australian Retirement Trust also allow you to benefit from the compounding effect. Over time, this can add substantially to the funds you have available for retirement.
2. Protection against inflation
Balanced super options are specifically designed to invest in a style that should come out ahead of the current rate of inflation.
Given the wider rises in the cost of living this year, this is a feature that can help provide peace of mind and help maintain purchasing power into retirement.
3. Financial stability in retirement
When it comes to retirement, stability is a big consideration for many Australians. You want to be sure that you can afford the lifestyle you want once you retire.
Balanced options are intended to deliver long-term returns with the aim of providing financial stability after retirement.
4. Diversify and manage risk
A diversified portfolio is designed to reduce risk, earn during a range of market cycles and increase your likelihood of stable returns.
The Balanced option for Australian Retirement Trust's Super Savings invests in a variety of different asset classes.
The next steps for your super
So with these considerations in mind, what does this mean for your super?
Well, it depends on your goals.
Tools such as the Superannuation Calculator can give you an idea of your likely future super balance.
Depending on your outcome, you may want to reconsider whether your super product is currently giving you the returns you want.
With extra funds thanks to the rise in the superannuation rate, you want to make sure it's invested wisely.
It may also mean seeking outside advice, too.
"At Australian Retirement Trust, we genuinely believe in the power of financial advice and the effect it can have on people's lives," says Patrick.
"So we encourage people to speak to a financial adviser, to set themselves up for better retirement outcomes."
It's important to remember that everyone's retirement ambitions are different, and what's right for someone else might not be right for you.
But by making informed choices, you'll be in a better position to set yourself up for the retirement you want.