Get organised and get ahead
This article shows how a 42 year old used her scattered super to start investing to make sure she has more than enough when she retires.
If you’ve ever changed jobs chances are you have more than one super fund. Having multiple accounts isn't just an administrative nightmare: it could be costing you precious dollars as well.
Consolidating your super can make a difference - Sarah's story
Sarah is aged 42 and has just helped her parents celebrate their retirement. They will be reliant on the age pension for most of their income in retirement and Sarah can see they will be forced into a basic lifestyle – not what she wants for herself.
She resolves to get her financial affairs in order and sees a financial planner.
Sarah is single and a nurse. She has worked in many hospitals and in her words “hasn’t got much super”. When her planner gets details of her funds, much to Sarah’s surprise, he finds she has $56,000 across 6 different funds. They are invested in balanced funds but this amount is enough to spark Sarah’s interest in investing her super more effectively. Her planner helps her understand basic investment principles such as the relationship between risk and return, her investment time horizon and diversification.
Sarah agrees she can invest more aggressively because she has at least 23 years until she retires. Her planner recommends a master trust platform. The trustees provide a menu of fully researched funds from which she can create her portfolio.
They agree on an aggressive asset allocation with 85% growth assets as shown on the table below.
Asset Class | Allocation | Amount | Annual fee | Comment |
Cash | 5% | $2,800 | 0.1% | |
Fixed interest | 10% | $5,600 | 0.2% | |
Australian shares | 35% | $19,600 | 0.9% | |
International shares | 25% | $14,000 | 1.0% | Spread between a value fund and a growth fund. |
Property trusts | 15% | $8,400 | 0.8% | A fund of funds manager |
Hedge funds | 10% | $5,600 | 1.5% | A fund of funds manager |
Her portfolio is diversified over 9 funds with an overall annual fee of 0.9%. The platform charges a fee of 1.0%.
Sarah commits to salary sacrifice to boost her super and the master trust fee will reduce when her account is over $100,000.
As Sarah presently has very little exposure to International shares, she and her planner believe that an exposure to this asset class will provide a well-diversified portfolio and the potential for better long-term growth opportunities. She arranges to allocate new contributions 60% to international shares, 20% to Australian shares and 10% each to hedge and property funds.
All the distributions from the funds will be deposited into her cash management account. Sarah and her planner agree to meet every 6 months to review her fund and allocate this money.
Sarah has a logon code and password so she can watch the performance of her portfolio regularly. She understands that the value of her growth funds will fluctuate daily but she finds that by watching her investments she can see how the daily news (like oil prices, company profits and global events like elections) impacts on her funds She is becoming a more educated investor and expects to retire more comfortably than her parents.
Consolidating your super
If you have multiple super accounts, consolidating them can take some time but as the Sarah’s story illustrates: it can be really worth it.
While this scenario may be similar to your situation the recommendations in this case may not be appropriate for you. Please feel free to contact us to discuss what will suit your circumstances.
Any advice in this publication is provided by AMP Financial Planning (AMPFP). AMPFP is part of the AMP Group of companies. No remuneration or other financial benefits are paid to AMPFP or their related companies or associates for providing advice in this publication. Any advice in this publication does not take account of your personal circumstances. Before relying on it to make a decision, you should consider how it applies to your overall circumstances or speak to a financial planner. Before deciding whether to buy or continue to hold any financial product including those referred to in this publication, you should also obtain and consider the Product Disclosure Statement for the product, which is available from your financial planner. Although this information was obtained from sources considered to be reliable, it is not guaranteed to be accurate or complete. The information in this publication is current as at the date of publishing and may change over time.