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Your guide to planning for retirement and building your super in Australia

How to plan for your retirement goals


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Your golden years are the time to kick back and start doing all the things you’ve wanted to do, and stop doing the things you don’t. Unfortunately, thanks to bad luck or poor planning, not everyone is able to ease into retirement by the age of 65.

The main key to retiring in style is leveraging your superannuation fund. This guide explains how to devise a superannuation strategy that works for you and how to plan for further income in old age, and gives you tips for pulling it all together.

In all cases your first step should generally be to consolidate your super into a single fund, unless you’re deliberately keeping them separate. This means choosing the right type of super fund and knowing about the available options. If you already have your super fund sorted out and are crystal clear on all the details, then you might want to jump ahead to planning your income in retirement.

Otherwise, start at the beginning.

AustralianSuper - Pre-mixed, Balanced Super Fund

AustralianSuper - Pre-mixed, Balanced Super Fund

Choose from an extensive range of investment options and enjoy discounted rates on select banking products when you join AustralianSuper.

  • 2019 Finder Awards Winner: Best Super Fund - Balanced
  • Join and consolidate your super with the easy-to-use mobile app
  • Australia's largest industry super fund

Compare super fund accounts

Name Product Past Performance - 1 Year Past Performance - 3 Years Performance - 5 Years Calculated fees p.a. on $50,000 balance
AustralianSuper - Pre-mixed, Balanced option
AustralianSuper is an award-winning industry super fund and the largest super fund in Australia. The Balanced fund invests in a mix of different assets like shares, property and cash.
Virgin Money Super - Lifestage Tracker
Virgin Money Super's Lifestage Tracker invests in a range of different assets in line with your age, reducing your risk as you get older, and has some of the lowest fees in the market.
Sunsuper Lifecycle Balanced
Sunsuper is an award-winning super fund with more than 1.4 million members. Its Lifecycle Balanced option invests your super in a mix of growth assets, and reduces your risk when you're near retirement.
QSuper Lifetime - Aspire 1
QSuper is one of the largest member-owned funds in Australia. The QSuper Lifetime fund adjusts your investments each 7-10 years as you get older, so you're not taking on too much risk.
HESTA Balanced Growth
HESTA is an industry super fund for the health and community services sector and open to all Australians. The Balanced Growth fund invests in a mix of asset classes without taking on too much, or too little, risk.
Spaceship GrowthX
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's Growth X fund invests heavily in Australian and international shares, with a focus on technology stocks. Performance figures and fees supplied by Spaceship, not Chant West.
Australian Catholic Super Lifetime - Grow
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.The Lifetime One fund option changes your investment mix as you get older.
Australian Ethical Super Balanced
Certified by the Responsible Investment Association Australasia.
Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.
Aware MySuper Life Cycle Growth
Aware Super is a not-for-profit fund with more than 750,000 members. The MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.

Compare up to 4 providers

The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

*Past performance data is for the period ending June 2020.

Your superannuation fund options

Once you’ve established your long-term superannuation fund you can start growing your investments. Before doing so, it can be worth making sure you’ve chosen the right option.

  • MySuper is the default option. When not otherwise specified, you will have this type of super fund. As of July 2017, any existing default funds will have been rolled over to MySuper accounts.
  • MySuper, SMSF and retail super funds are available to everyone.
  • Industry funds and corporate funds are not necessarily available to everyone.

The table below gives an overview of the different options. Note that these options are not all mutually exclusive. For example, you might get a MySuper through an industry fund, or your employer might not offer any kind of corporate super fund.

Defining featuresProsConsWho is it good for?
MySuperThe default fund. Simple and effectiveSimple and cost-effective features, fewer and lower fees, effective investmentsOther funds may be preferable for youEveryone
Self-managed super fund (SMSF)Assume full control of your own super fund and investmentsPotentially greater returns, a high level of flexibility and tailoring, can be held by up to four peopleGreater risk, can be a lot of work, requires some financial and legal know-how, you are personally liable for all losses, does not include insurancesExperienced investors, people with very specific retirement plans, groups of 4 or fewer who want to share retirement plans
Retail fundCommercial superannuation product sold to consumersMany options, can offer substantial returns, some offer a MySuper optionTypically has higher costs and fees, the company retains a profit, can vary widely in many waysPeople who have compared a specific retail fund to other options and found it to be preferable for them
Industry fundNon-profit industry super fund, membership basedCan offer industry-specific benefits, mid to low cost, some offer a MySuper optionFewer options than retail funds, higher costs than MySuper, some but not all are restricted to employees of certain industriesPeople who can benefit from the specific advantages of that fund or are in a relevant industry
Corporate fundEmployer superannuation for employeesVaries depending on the company and fundVaries depending on the company and fundEmployees of that company

How to pick a super fund

Here are some tips on how to choose a super fund type:

  • If an SMSF doesn’t sound right for you then it’s probably safe to rule it out immediately.
  • Consider using MySuper as a baseline against which to compare retail super funds, as well as industry or corporate funds.
  • If you’ve compared other options and found nothing preferable to MySuper, then that’s probably the way to go.

How to compare super funds:

  • Fees: Look for lower fees, as these will be paid over time out of your retirement nest egg. Specifically look for additional value to justify any fees and consider avoiding options that don’t deliver.
  • Investment choices: Look for a fund that has options to suit your needs and personal appetite for risk.
  • Extra benefits. Your employer is required by law to pay a certain proportion of your ordinary earnings into your super fund, but this base amount is only the core contribution. Some funds will have more than this, while others have additional ways you can make contributions.
  • Performance. When comparing superannuation fund investment performance, look at how it’s done over the last five years, and look for consistently good performance.
  • Insurance. Many super funds offer some form of life insurance cover, but typically at extra cost. Weigh the costs and benefits.
  • Service and additional benefits. MySuper only offers core investment and retirement planning, but retail and other funds can provide varying additional benefits. Once again, consider these but be mindful of the cost.

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Choosing an investment strategy

An investment strategy is all about mixing up growth and defensive investments until you have a balance that works. Growth investments are the high risk ones such as real estate or shares that may considerably increase or decrease in value, while defensive investments are the low risk ones like cash and fixed interest accounts that generally won’t lose much value.

Superannuation investment strategies can be divided into four groups, representative of most of the options out there. Going with your personal taste for risk versus reward can work, but there are some other factors to consider, in particular:

  • Higher risk options (growth and balanced) typically have better returns in the long run.
  • You can, in the long run, expect higher risk options to actually lose money in the bad years. Typically they will make it back and then some in the good years.
  • Some funds may also offer “high growth” options that invest 100% in shares and property.
  • The default MySuper option is typically equivalent to a balanced strategy.

Note that these options do not apply to MySuper, which has its own special strategies explained further below.

TypeApproximate investment mixTypical expected returnExpect a loss
GrowthHigh risk, high return85% shares and property, 15% cash or fixed interest6.2%4 or 5 years in 20
BalancedMedium risk, medium return70% shares and property, 30% cash and fixed interest5.7%4 years in 20
ConservativeLow risk, low return30% shares and property, 70% cash or fixed interest4.2%0 years in 20
CashNo risk, guaranteed returns100% fixed interest with Australian institutions2.9%0 years in 20

How to choose an investment strategy

When picking an investment strategy, some of the most important factors to consider are your age, your situation and your personal taste for risk.

  • Age: Higher risk options are usually more suitable for younger people, while safer lower-risk options are often preferable for older people.
    • In the longer run, higher risk super funds have more time to ride out the ups and downs of the market, and end higher.
    • Older people, or anyone else who may be drawing super within a few years, may be at higher risk of losing funds to a single bad year at the wrong time.
  • Your situation: If your retirement goals require a specific investment strategy, then it might be worth opting for a higher risk than you would normally take for a shot at it. Similarly, if you know you’ll need at least a certain amount then a low risk strategy could be a much more dependable option.
    • Consider how much you’ll need for retirement. If a low or no risk strategy can help you achieve it comfortably you might want to consider playing it safe.
    • If you’ll be withdrawing your super in the near future, lower risk investments are substantially safer.
  • Your taste for risk: This is important because an investment strategy that works for you is one that you are comfortable with. You’ll usually be in it for the long run, so avoid a strategy that keeps you lying awake at night.

MySuper investment strategies

MySuper has two straightforward investment options. The default, and the more popular of the two, is generally equivalent to a balanced investment strategy. You can find out more about the exact investment strategy and breakdown by checking with your super fund.

The second is the lifecycle investment strategy option, which automatically adjusts the risk levels based on your age. A typical lifecycle investment strategy mix might look like:

  • 85% growth, 15% defensive investments up to age 45
  • 75% growth, 25% defensive from age 45 to 55
  • 55% growth, 45% defensive from age 55 to 65
  • 40% growth, 60% defensive age 65+

Planning your income in retirement

Superannuation is just one of your post-retirement income sources. Knowing about and planning for all the other ones that may apply can help you balance the budget. After retirement you may still earn income from sources like:

  • Age pensions
  • Home equity releases
  • Selling off assets like the family home
  • Working part-time
  • Investments outside of super
  • Superannuation

Once you know how much you will need for retirement, you can look at these expenses next to your sources of income. In addition to this, there are several ways to manage your superannuation income to make it work for you.

Upon retirement, you are able to get paid the total amount you have saved in your superannuation fund, and can divide that amount into specific types of payments. Depending on your situation, you can use these options to make your retirement funds go further.

Lump sum: Get super paid out as a lump sum.

  • You generally pay no taxes on lump sums withdrawals if you are aged 60 or over, and 22% if you are under your preservation age at the time of withdrawal. If you are between your preservation age and the age of 59, then the first $195,000 is tax free and the remainder is taxed at 17%. By waiting longer to withdraw a lump sum you might be able to pay less tax, but will not have access to the funds as soon.
  • Lump sum payments can be a good choice if you want to reinvest the money quickly.
  • Beware of this option if you have poor spending control.

Regular income stream: Get paid from your super in regular instalments.

  • Choose payments of almost any size and vary them as needed from year to year.
  • Get regular smaller payments, and manage payment size for tax advantages.
  • Save money day to day by being able to budget for a consistent income.

Purchase an annuity: Annuities can give you guaranteed income and other advantages for defined periods, but typically do not pay as much as other options.

You can combine the above options as desired to create an after-retirement financial plan that works for your needs. One of the main ways to save more money here is with the considerations around superannuation payouts, for example ensuring any lump sums fall short of the taxable threshold. Consulting a financial adviser ahead of time can be a valuable way of planning for retirement and making sure you’ve optimised your finances.

10 retirement planning tips

    • Diversify your investments. If you will be dependent on your investments to support you in retirement, diversification is vital. Make sure you invest across a variety of options and never put all your eggs in one basket.
    • Consider managed funds for property investment. Property investments can be potentially lucrative, but carry a high price tag that puts it out of reach of many people. Managed funds, which are where a professional manages your superannuation investments for you, can invest your money in real estate, even if you don’t have enough to do so yourself.
    • Don’t underestimate savings accounts. Good old fashioned bank accounts are still one of the few ways to enjoy a guaranteed return on investment.
    • Protect your assets. You’ll largely be living off your assets after retirement and it’s a good idea to make sure they’re protected no matter what form they take. This might be anything from purchasing insurance for your property to getting sturdy waterproof bags for the stacks of cash under your mattress.
    • Plan on living longer. Age 65 to 100 is a long time, almost enough to get you to middle age all over again. These days it can be prudent to plan on living for that long, or even longer, after retirement.
    • Claim all the benefits you can. In addition to age pensions, you may be eligible for other assistance. Set pride aside and make sure you are claiming as much as you can.
    • Remember your goals. Your retirement goal is probably to save as much money as you can ahead of time. Keep this in mind, and remember to look at the actual over-time value of investments and expenditures.
    • Plan a lifestyle. If your superannuation fund isn’t on track to buy a private island by the time you’re 65, you might need to reconsider your planned lifestyle. Plan a post-retirement lifestyle that works for you and your means.
    • Stress-test your retirement plan. How robust is your retirement plan in the face of adversity? When you’re budgeting it, consider adjusting some of the variables to see how well it can withstand changing circumstances.
    • Start ASAP. The sooner you start working out your superannuation and retirement plans, the sooner you can really focus on saving. The last decade or so before retirement is a good time to make sure everything is in order, but everything before then is a good time to save as much as you can. Remember, money you put into your super fund usually grows over time. It might seem like it’s disappearing at times, but in fact it’s doing the exact opposite.

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