In your 40s and 50s, you’ll be more established in your career and personal life than in decades gone by. If you haven’t started thinking about your superannuation balance, now is the time.
Don’t worry – it’s not too late to get your superannuation sorted. It’s still possible to make the most of your hard earned money going into super. This will help guide you on what matters in your super.
You can also find out more about:
- Choosing the best superannuation fund in 20s and 30s
- Choosing the best superannuation fund when you’re in your 60s+
What’s the best type of super fund for your 40s and 50s?
Growth and balanced funds are suited to most people in their 40s and 50s. At this age you may be looking to protect the superannuation you’ve accumulated in your 20s and 30s. If so, you want a super fund with some more defensive investments mixed with some growth investments.
Growth and balanced funds have a mix of growth assets (such as shares) that have a higher potential for returns/ These are mixed with defensive assets like bonds and cash to reduce the potential for large losses.
Find out who are the best performing moderate and balanced superannuation funds in 2021.
Why super fees matter
A typical Fat Cat Fund charges 2% per year in fees. This doesn’t sound like a huge sum, but it is over a lifetime of superannuation that the devastating impact of high fees can be seen.
By switching out of a fund charging 2% per year to one charging less than 1% per year, you could increase the super you have by $180,000. Too many Australians are unaware of the impact that compounding high fees have on their long term savings.
3 tips to get the best superannuation fund
- Check your super is in a growth or balanced fund. These are suited to most people in their 40s and 50s. Both have a mix of growth assets like shares, bonds and cash. At this age you want to reduce the chance for large losses in your super.
- Pay less than 1% in fees. Find a fund with low fees. Remember you could save over $180,000 simply by paying less for your superannuation
- Consolidate your funds. If you have more than one super fund you’re paying double or triple in super fees. If you’ve had a few jobs and started a new super fund each time you need to consolidate them. Most super funds will help you consolidate your funds. This will also help ensure that you’re not paying double for insurance premiums.
Effect of super fees in your 40s and 50s
|SUPER FUND CATEGORY||EXPECTED SUPER BALANCE AT RETIREMENT BEFORE FEES||FEE AMOUNT||EXPECTED SUPER BALANCE AT RETIREMENT AGE AFTER FEES||HOW MUCH OF YOUR RETURN IS LOST IN FEES|
|High fee fund (2% p.a. fee)||$853,049.52||$167,822.32||$685,227.20||20%|
|Low fee fund (>1% p.a. fee)||$914,768.30||$49,424.07||$865,344.23||5%|
Questions to ask your super fund
What are the total investment fees I’m paying?
If the answer is more than 1% per annum you could be in a Fat Cat Super Fund. Super funds can be a tricky bunch and some make it willfully difficult to understand how much you pay them to manage your money.
Fee disclosure varies greatly between funds: many don’t show fees on their website and hide them deep in downloadable documents.
Don’t give up! Keep asking. They have to tell you. Investment performance comes and goes but fees are with you every year. It’s important you know how much you pay your super fund, it could mean the difference of hundreds of thousands of dollars in retirement
Do you use ETFs or index funds?
Our research shows that 99%^ of balanced super funds did worse than Stockspot’s low-cost index strategy after fees and taxes.
Index funds are easy to access for superannuation managers, all the research shows index funds do better than standard super funds, yet many choose not to because of the conflicts of interest in the industry.
Historically you would have done better than 99% of the other super funds if you were simply in an indexed option that followed the market.
^ These findings are consistent with research from Finalytiq which found similar results in the UK: Finalytic, The Multi-Asset Fund Guide, S&P Dow Jones whose SPIVA research shows that 80% of active Australian share fund managers have underperformed the index over 15 years. S&P Dow Jones SPIVA Australia Year End 2019