Just about every adult Australian knows the term “superannuation”. But how many of us truly understand the gears that turn within our super funds? Are you getting the full power out of your super?

In this latest episode, we’re getting to know why your super is super with someone who eats, sleeps, and breathes super. We’ve got our incognito guest Dr. Super who works for an industry super fund and brings the insider scoop to answer your questions.

In this episode, Dr. Super brings clarity to the First Home Super Saver Scheme and lays down some wisdom on super for the self-employed. Because super isn't just about accumulation, they also share insights on navigating insurances within your super.

For every Aussie who's ever wondered if they're doing super right, this conversation is essential listening. This is a step towards making sure every hard-earned dollar in your super is pulling its weight. It’s about turning your super into a tool that can help you today – not some pot at the end of the rainbow you can’t reach.

How does one transition from psychology to a role in the super industry?

Dr. Super’s segue into the world of superannuation wasn't intentional, but rather a fascinating crossing of two interests. It began with their academic curiosity about how people behave and a hobbyist’s love for personal finance.

Like many of us, Dr. Super dipped a toe into the waters of investment markets. The toe in the water soon became a dive into the mechanics of investing. However, it wasn’t just the numbers and charts that hooked them.

Dr. Super realized superannuation was not some distant, almost mythical part of financial planning like many Aussies think. They had a revelation: our super is more than a retirement nest egg. It's an active investor in our nation-building. For Dr. Super, this was a rich ground yet to be explored.

The career pivot then happened when Dr. Super conducted some university research that examined the very human concepts of risk and loss aversion. Essentially, they discovered that the principles guiding financial decisions often mirrored explanations of human behavior. This research led Dr. Super directly to a role within a super fund right after university.

In their role in the super fund’s ecosystem, Dr. Super leverages their background in psychology in interactions with super fund members. They understand what drives them, worries them, and excites them about their financial future. It's people-watching with a purpose, gaining insights into what the members truly need.

What are the most commonly asked Super questions?

Have you glanced at your superannuation statement and found yourself pondering: "Why's my super balance going down?" According to Dr. Super, that's one of the burning questions most investors have when the tides of the market turn.

Understanding the ebb and flow of your Super balance

Here's what you might not realize: your super isn't just sitting pretty. It's hard at work in the investment markets. Think of it like a garden. You plant your seeds (your contributions), and sometimes the weather's great, sometimes not so much.

Risk and return are two sides of the same coin in any kind of investments. In the pursuit of higher returns, we embrace more risk, and with it, the inevitable volatility. When that risk rears its head, and the balance dips, the first instinct might be to panic.

Dr. Super explains that understanding this relationship is key to setting realistic expectations for your super's performance. The key, they say, isn't to get caught up in the day-to-day. Instead, we zoom out. Super is a long game – think decades, not days.

So, what do you do when your super seems to be not performing as you expected?

First, understand what you're super is strapped into – because not all supers are created equal.

Super funds usually offer a spectrum of options, from a conservative mix to perhaps a more aggressive growth path. ‘My Super’ option, for instance, is a government-approved default that balances growth and safety. It may not be a custom fit for your situation, but it's designed to suit the average super holder.

Meanwhile, other super funds subtly move you from aggressive to conservative allocation as you get older. The shift isn't uniform across the board, though. What's considered 'balanced' in one fund could be 'conservative' in another.

Now, this strategy is not necessarily a bad thing, but it is something to be aware of and worth checking. You want to make sure that your current allocation actually aligns with your situation and risk tolerance. It’s not personal finance without you in the driver’s seat and knowing where your money’s going.

So, before you start thinking about how to put more money into your super or how to take it out, understand where your money is sitting. Is it aiming for a riskier high-growth goal, cruising along conservative waves, or perhaps somewhere in the middle?

What are some things you can do with your super that you might now know?

First off, it’s not all doom and gloom if you’ve just left your super sitting there. Chances are it’s not performing abysmally. There's a safety net woven into the system, after all.

But why settle for decent when you could aim for brilliant? The truth is we're a bit in the dark about our supers. Yet, learning about its features could help you swing a bit higher on the financial playground.

A. Choosing investment options for your super

Your superannuation isn't set in stone. You have options to steer your retirement savings in a direction that suits you. Most people sail in the default option, which has a fixed or lifecycle asset allocation.

But what if you want more control? You can mix it up with 'pre-mixed options', which are like a chef's blend designed with a goal in mind. High growth, balanced, or conservative, there's a mix for every financial appetite.

For those with a taste for something specific, 'single sector options' let you pick and place your chips on Australian (or international) shares, property, bonds, or cash.

But before you start tinkering with your investments, Dr. Super highlighted that they believe a 'set and forget' strategy would likely win the race. Frequent switching can lead to fees eating into your profits. And, without the right tools, you may not even know if you're better off after all that effort.

Super funds generally dish out advice on how long you should stick with an investment. They also serve up estimates on the number of years you might see a negative return out of 20. It sets realistic expectations for the inevitable rise and fall of tides in the market.

But what if you're feeling out of your depth here? Super funds often have a lifeguard on duty in the form of financial advisers. From general advice to in-depth planning, professional advice is part of the services your fees pay for.

B. Changing insurance options in your super

It's no secret that we're a nation underinsured – perhaps because we tend to have that 'she'll be right' attitude. The truth is life finds ways to surprise us. When it does, your insurance is the lifeboat for the storm you don’t see coming.

Most Aussies, by default, have a trio of insurance types nestled within their super. These are: life cover, total and permanent disablement (TPD), and income protection.

What many don't know is that your insurance coverage can be tweaked. Life's stages are like changing scenes in a play, and your insurance needs to shift with the script. If you’re single, your insurance scene looks different than when you're the lead in a family.

A regular check-in on your cover could be the difference between just enough and not nearly.

Now, you might ask: “what happens when I switch my super funds?”

Here's a critical fact many miss: changing funds can cancel your insurance within the old fund. If you're someone with health issues, making you a tricky candidate for new insurance, this could leave you exposed. So before you jump ship, make sure your insurance makes the leap with you.

Occasionally, it might even make sense keep the old one open just for the insurance. We often hear "don't juggle multiple super funds," and that's sound advice. Yet, sometimes a moment of “breaking the rules when it's right” arrives in any personal finance journey. Of course, it's important to read the PDS and TMDs or speak with a financial advisor before making any decisions.

C. Making personal contributions to your super

For starters, Dr. Super drops a game-changer strategy called salary sacrifice. It's as simple as telling your employer to chip in a bit more to your super, before it even brushes your bank account. Salary sacrifice is that “out of sight, out of mind” principle that can increase your super without you feeling the pinch.

This extra money gets taxed at just 15%, a potential bargain compared to your usual tax rate. However, the government limit currently sits at $30,000 for concessional contributions at the lower tax rate. Any dollar contributed over this cap could be taxed heavily, so keep a sharp eye on those numbers.

What if you have some extra cash from a bonus or inheritance? You can still personally add it to your super and even snag a tax deduction when you file a ‘notice of intent’. Essentially, you're telling your super fund to treat your contribution as concessional – potentially reducing your taxable income.

And for those not on a super high income or taking a career pause? Dr. Super cautions against salary sacrificing. You wouldn't want to pay 15% on what would otherwise be tax-free money.

Instead, consider the benefits of paying non-concessional contribution . Just contribute to your super, and you could receive up to $500 of government co-contribution. That’s a 50% return on a $1,000 contribution if you meet the criteria.

Answering questions from the audience

Q: “Choosing a super fund is so hard with so many out there with not enough history. Help!”

A: Let's start at square one: do you know where your super is? It's a common tale – people with bits of their retirement scattered across various funds.

Consolidation is step one, and it's easier than you think. A quick visit to the ATO services page on myGov could reveal the landscape of your super. You may even discover a long-forgotten fund from that summer job a few years ago.

Understanding the costs associated with your current fund is the next breadcrumb on the trail. What are you paying for, exactly? Super admin and investment fees – these little figures can chip away at your future comfort, but they’re negotiable.

Once you've got a grip on your current situation, what next? Stay put, or venture out for something better? It's research time. Tools like Chant West offer side-by-side fund comparisons, including insurance premiums.

In your research, you’ll come across dozens of super funds, but the biggest players often come out on top of recommendations. Why? It's all about economies of scale. The larger the fund, the more they can slice fees, making your super work harder for you.

So, what's considered a low fee? Dr. Super says: If you're hovering around 0.5% to 0.8% per year in total fees, you're in the green zone.

Yet, fees aren't the be-all and end-all. Maybe you cherish stellar customer service, or an adviser who knows your name – and that's okay. Or perhaps lower insurance premiums with a particular fund make it worthwhile to pay a little extra fee. In the end, it's a balance of costs, benefits, and the peace of mind each option brings.

Q: “ I was wondering how you actually feel about super? I’m leaning towards it not being that beneficial in our age group (early 30s) because I’m sure something will happen that won’t allow us to access it until we are dead at this point.

(I’m self employed so I don’t bother with super at the moment and would rather put money into other investments.)”

A: For employees, super is a form of enforced savings, a pot of gold for the golden years that's safe from impulsive spending. For the entrepreneur, every dollar must prove its worth.

Yes, investing in your own venture can yield tangible and personal returns that super might not match. But is it wise to pour everything into one place?

Diversifying your money is not admitting doubt in your business. It's ensuring you're not left with nothing if the market flips your dreams upside down.

Plus, let's not overlook the concept that made Warren Buffett wealthy in the first place. The power of compounding interest works in super accounts too. It’s the financial equivalent of a snowball rolling downhill, gathering mass. Only this compounding snowball can build your wealth even if your business stalls.

Then there's the insurance angle of your super. Building a buffer is a detail often missed in the hustle of betting everything on your own venture. Without contributions, your super's insurance buffer can wither away. If life suddenly throws a curveball, all the businesses you’ve created and wealth compounded until then could be at risk.

Q: “Thoughts on the First Home Super Saver Scheme ?”

A: The First Home Super Saver Scheme (FHSS) is a less trodden but potentially promising path for future homeowners. In essence, you’re allowed to use your personal super contributions – not your employer's contributions – to buy your first home.

Now, don't go planning a mansion just yet. You can't just withdraw an endless stream of cash. There are caps: $15,000 per year, with a total limit of $50,000 as of our last update. It’s not a blank cheque, but it’s a helpful boost for that down payment.

What if things don’t go as planned and the white picket fence dream gets shelved?

Well, your contributions are pretty much grounded in your super until you reach preservation age. Withdrawing it for other purposes could attract penalties. For this, you might want to double-check with the latest Australian Taxation Office (ATO) information on FHSS .

Additionally, when you do withdraw your savings, there's a small tax to pay on that amount too. So, you'll need to weigh up the time your money's spent growing in your super against the benefits of using it now. Is it worth it? That's a question only you can answer.

In essence, if your dream home is calling, the First Home Super Saver Scheme could help you answer that call sooner. However, it's not without its caveats.

Our advice? Weigh the pros and cons, consult the ATO for the latest rules, and plan with care and consideration to your financial situation.

Wrapping up: Things you can do right now with your super

You've heard it before – the future depends on what you do today. So, as we close this episode, we leave you with a checklist for a superannuation health check.

1. Check-up for your super

You give your car a regular tune-up, right? Well, Dr. Super suggests the same goes for your super. It’s time to figure out where you stand in the risk-reward equation and whether your super matches that.

Start by looking into your current investment options and insurance. Are they aligned with your goals and life stage? If you're not sure, it's time for a check-up.

2. Benchmark your super

Ever wonder how your super stacks up? The Association of Superannuation Funds of Australia (ASFA) has a tool for that. By punching in a few details, you get a benchmark of where your super should be. If you’re not quite there, remember, a good plan and long-term outlook can give you the results you want.

3. Use your super perks and ask for help

Those admin fees you're paying? They're your ticket to clarity. Ask questions. Then ask some more. Dr. Super insists there's no such thing as a silly question.

If this insightful episode with Dr. Super has got you thinking, we've done our job. But this article has merely skimmed the surface. Our full episode below dives even deeper into the details. For newcomers to long-term investing, our first 10 episodes are made to be the beginner investor’s toolbox.

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Happy investing!

Tash & Ana