Consolidating your super will likely increase your savings in the long-term, writes Alan Hartstein.
More than $17.5 billion of Australians’ money is currently unaccounted for, lost, or otherwise sitting in dormant accounts, according to the Australian Securities and Investments Commission’s MoneySmart website. A large amount of this is held in superannuation funds, and some of it could be yours.
For many people, accumulated super savings will not only be their major source of income in retirement, but possibly their only income, so it’s vital you get your super in order as early as possible to maximise that investment. It might feel distant now, but when you’re in your 60s and retirement is right before you, that money will be very real.
Consolidating your multiple and often long-forgotten super accounts into one has a range of benefits. Not only does it help you to more easily keep track of your investments but it will, in most cases, save you a large amount of money over the long period of time you accumulate superannuation savings.
A large portion of Millennials in particular seem disengaged with the subject of super and the whole concept of consolidating accounts, according to a March 2017 report by The Association of Superannuation Funds of Australia.
By failing to consolidate multiple super accounts, these young people especially risk eroding their balances unnecessarily by paying multiple fees and charges.
The report found:
First, Robinson says to consider that people often overlook insurance in their superannuation and lose it when they switch to one account. You’ll want to make sure you have the insurance you want in the super fund you consolidate into.
There’s two other considerations. Those drawing a pension from their super may find cash flow flexibility across different market conditions in having one fund investing in defensive assets and another in growth assets. Also, “consolidating a tax-free fund with a taxable fund can lead to a loss of flexibility in estate planning in retirement” warns Robinson.
But for most of us, the advantages of one super account are clear.
To discuss whether you should consolidate your super, contact your financial adviser.
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Before re-directing your super or moving your money into your product, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.
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