Your investment strategy differs with your time of life

Below is expert advice on superannuation from Condontreasure Chartered Accountants principal Rob Thornthwaite. 

Advice for those just entering the workforce:

Do something. But that doesn't necessarily mean you focus on growing your superannuation. It will be a long time before you can access any money in super, and who knows what the future will bring? I would first focus on establishing a rainy day fund and then home loan reduction if you have one. A rainy day fund can be as simple as having access to a credit card with an unused balance. If you have these two in order then you can consider additional contributions into superannuation.

Be warned though - just putting your 9.5% compulsory super guarantee contributions into super and receiving normal market rate returns will mean you will not have anywhere near enough to retire comfortably.

Advice for those in the workforce for 10-20 years:

This is your time to build wealth. Again the priority is a rainy day fund and then debt reduction on all "bad" debt. If these are in order you could look to grow your superannuation balance. You also need to focus on your wealth protection issues. Have you got adequate life insurance?

Advice for those heading towards retirement age:

First build a rainy day fund if you haven't managed to do so until now, pay down all debt and then look to see how you can maximise your retirement nest egg. The most important thing I can stress is that you need to head into retirement debt-free. Now is not the time to take risks - if you haven't made your fortune by now then taking risks to catch up is fraught with danger.

Proposed changes to superannuation

This all depends on where your political and social views lie. Some argue we should tax superannuation more as it's a source of tax concessions for the rich. Others think super should be left alone as any additional taxes are a deterrent to saving for retirement. My views are this - don't change the rules. If we want to encourage people to build up their superannuation and aim to be self-funded retirees then we need to give them certainty about the investment outlook. There are two major changes discussed in the current environment that will have a significant impact on superannuation. The first change is aimed at reducing or removing borrowing within self-managed super funds. I think it would be a mistake to change policy again. We already have a convoluted two-tier system due to overhaul of the borrowing arrangements in 1999 and later tweaks. The second change is around taxing super balances and superannuation earnings above $100,000 where previously they might have been tax-free if the fund was in pension phase. I think the fact these changes have been flagged creates uncertainty for people planning retirement and making investment decisions and makes it more complicated to plan for the future. Changes just complicate the investment and retirement landscape.

Self-managed super funds

Again there has been a lot of media coverage about the pros and cons of setting up your own self-managed super fund. Industry funds have been particularly aggressive in highlighting weaknesses while self-managed super fund service providers like myself sing its praises. Perhaps the answer lies somewhere in the middle.

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