Singles and super: Choosing the right plan

Looking out for your financial future is important. If you’re single, these simple options can help you boost your retirement savings.

More people are staying single for longer, living alone and not getting married at all. Combine this with the fact many of us can now expect to live beyond 100 and it becomes clear that saving for retirement is even more important. Here are some super options that may help singles create a solid nest egg.

Singles and super

How much will you need?

According to the Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard a single wanting a ‘comfortable’ lifestyle after retirement will need $840 a week, or $43,665 a year. For singles to only sustain a ‘modest’ lifestyle once they’ve stopped working they will need $24,250 per year.

Currently the Age Pension does not even provide enough money for a ‘modest’ lifestyle, delivering only around $20,000 a year if you are single or just over $30,000 for a couple.

It is important for us to work out how much we need in retirement, so the first step for singles is to look at their pension reserves to see if what they have will give them enough for the lifestyle they want to lead when they retire.

MoneySmart’s Retirement Planner is a useful tool for helping you determine your likely retirement income and what you can do to boost it.

Choosing a fund

Like many singles, you may be investing your superannuation money into a standard superannuation fund. It could be bank-aligned (these sometimes have higher fees) or it may be a not-for-profit fund.

Whichever option you have chosen, the ATO says it is important to compare different funds to see what best suits your circumstances.

Things to look out for:

    Fees: The lower they are, the more will be going into your pension pot.
    Extra benefits: See if your fund allows you to make contributions over the standard 9.5 per cent that your employer is required to pay you by law.
    Fund performance: Investigate how well your superannuation fund has performed over the long term (at least five years). Be careful not to chase a fund that has only done well in the last year or so. It’s about the long game.
    Insurance: Many people are not aware that they often receive insurance coverage via their super funds. Check out if yours offers it and see if it suits a single.
    Other services: See if your fund offers other services, such as financial planning or discounts. Getting financial advice can be the best way for a single to safeguard their financial future.

Once you have compared your fund with others and sought the advice of a financial planner, feel free to switch super funds. You are not required to stay with your employer’s default fund.

Aggressive investing

Choosing the right investment option is another important way that singles can boost their retirement savings. Selecting the option that is best for you all comes down to which life stage you are at.

Superannuation funds invest your money to grow your nest egg and will let you choose from a range of options. If you don’t make a choice your money will be put into a default option, sometimes known as the MySuper option.

However, if you’re younger you may want to invest in a more aggressive option that may involve a higher degree of risk, but which has the potential to provide you with greater returns.

It is a good idea to contact your superannuation fund to seek advice about the strategy behind each investment option, the investment returns it aims for and the risks involved.

Consider other super options

While the traditional superannuation fund can be a low-maintenance way of looking after your retirement savings, singles may want to investigate bespoke options that are more suited to your situation.

These options include:

    Setting up an SMSF: This type of fund works in a similar way to other super funds, but you are able to be the trustee. This means you can invest your money according to your own wishes. Don’t forget that setting up an SMSF means you take on a number of legal responsibilities.
    Investigate corporate funds: These funds are generally linked to your employer, but they can sometimes provide access to defined benefit funds. These types of funds do not work solely on how much you earn or have put in; instead, they generally pay super benefits based on a formula that takes into account a fund member’s average salary and years of service.
    Consider an annuity: This product pays you a guaranteed income for a defined period of time. An annuity can be for a lifetime of a fixed number of years. This can provide peace of mind for a single.

Put more into your superannuation

While you’re working, another option is to put money into your super over and above what is invested by your employer.

One way to do this is to salary sacrifice. This involves giving up a portion of your pay and putting it into your superannuation instead. While giving up some of your take-home pay might be a challenge, there are two main benefits to doing this: it gives your retirement savings a boost, but also it allows you to claim a reduced tax rate.

Some other ways to boost your super include:

    Salary packaging: Check with your employer whether they offer this.
    Government co-contribution: If you make after-tax contributions to your super the government will match some or all of what you put in. How much the government will give you is dependent on how much you earn.

Having enough money to retire so that you can enjoy a comfortable lifestyle is important for all Australians, especially if you’re single. While being part of a traditional superannuation fund is one way to build your wealth, it is worth investigating if taking more control of your superannuation might be right for you.

If you want to learn more about SMSFs, download an information pack today. If you’re ready to establish an SMSF, you can apply now with ESUPERFUND.

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