Being self-employed can offer a lot of freedom, but it also means you’re responsible for your own retirement planning. Should you contribute to your superannuation, or are there better ways to invest? In this article, we'll explore the key questions to ask yourself and some alternatives to consider.

Being self-employed gives you the freedom to shape your career, but it also means taking on extra responsibility – especially when it comes to planning for retirement. Without employer contributions automatically boosting your superannuation, the decision to contribute is entirely up to you. It’s not always a clear-cut choice, though, and it depends on where you’re at in life and what your financial priorities are.

Instead of a one-size-fits-all answer, let’s explore some key questions. These can help you decide if contributing to super makes sense for your situation. Or, you might find other options – like ETFs, bonds, or property – are more suited to your needs.

When are you planning to retire?

First things first: when do you actually plan to retire? If you’re looking at retiring earlier than most – say, in your 40s or 50s – super might not be the best place to stash all of your savings. That’s because you can’t access your super until you hit your preservation age, which is typically between 55 and 60.

Super is suited to long-term savings because of its potential tax perks. But if you need to access funds before retirement, you’ll want to consider whether locking them away in super is the right move. On the other hand, if you’re planning to retire closer to 60 or beyond, super can provide a disciplined way to grow your wealth over time without dipping into it prematurely.

Things to think about:

• Early retirement goals : If you want to retire before you can access your super, you may need other sources of funds or investments to bridge the gap.
• Staying the course : If your retirement age lines up with when you can access your super, it could be a way to take advantage of possible tax savings and build your retirement fund

Do you own your own home, or are you renting?

Your housing situation can play a huge role in how you approach retirement savings. If you own your home (or are close to paying it off), you’ll have lower living expenses in retirement, which means you might feel more comfortable putting extra money into your super.

But if you’re renting or still paying off a mortgage, your financial priorities might be different. Renters will need to factor ongoing housing costs into their retirement budget. If you’ve still got a mortgage to deal with, you might want to focus on paying that down before throwing too much into your super.

Things to think about:

• Mortgage vs. super : If you’re nearly done paying off your home, you might shift your focus to boosting your super. But if that mortgage is sticking around for a while, you may consider knocking it out first
• Renting considerations : If you’re renting, ensure you’ve got enough retirement savings or other income sources to comfortably cover your rent after you stop working

If you don’t own your home, are you saving for one?

Saving for your first home can feel like a competing priority with super. However, the First Home Super Saver (FHSS) scheme could help you do both. The FHSS scheme lets you make voluntary contributions to super, take advantage of the tax benefits, and later withdraw some of that money to put toward a home deposit.

It’s a handy way to save for your first home in a tax-friendly environment. But remember that there are limits to how much you can access, and the rules around it can be strict.

Things to think about:

• Double duty savings : The FHSS scheme can help you save for a home and still grow your super at the same time
• Balancing goals : Weigh the need for a home deposit now against the long-term benefits of building up your super balance

As with any financial decision, consider speaking to a financial adviser when in doubt.

Do you want to access your investments before retirement?

One of the biggest downsides of super is that it’s locked up until you hit preservation age. If you’re self-employed, having access to cash is important – especially if your income isn’t steady. Super can offer tax breaks, but if flexibility is your top priority, it might not be the best place for all your money.

In this instance, you might want to consider splitting your savings between super and more accessible investments like shares, ETFs, or property, which you can tap into more easily. These options won’t offer the same tax benefits as super, but they could give you the flexibility to access funds if something unexpected pops up.

Things to think about:

• Flexibility vs. tax savings : Super locks your money away, but the tax savings could be significant. If flexibility is important, consider other investments outside of super
• Emergency cushion : Think about keeping some funds in more accessible investments, just in case

Super alternatives for the self-employed

If contributing to super doesn’t feel like the best fit for your situation right now, don’t worry – there are other ways to invest and try to grow your wealth. Here are a few popular alternatives that may offer more flexibility and potentially strong returns.

Exchange-traded funds (ETFs)

ETFs are a simple, flexible option for long-term investing. They let you invest in a wide range of assets – like shares, bonds, or even commodities – all in one go. Plus, ETFs are liquid, which means you can sell them anytime you need access to cash. They’re a favoured choice for those who want the potential for long-term growth without locking their money away.

Property

Property is a popular investment choice, especially in Australia. Whether you already own a home or are looking to invest in property, it can provide rental income and potential long-term capital growth. Real estate is a tangible investment, and you can often leverage it (borrow to invest), potentially increasing your returns. That being said, capital growth isn’t guaranteed, and property isn’t the most liquid investment. Selling can possibly take months (or even years). What's more, it almost goes without saying, but property in Australia is expensive . Given the cost barrier to entry, it may not be a viable choice for all investors.

Bonds

For a lower-risk investment option, bonds can offer stability and steady returns. While they won’t provide the same high-growth potential as shares or property, bonds are reliable and can balance out a more aggressive investment portfolio. If you’re looking for a fairly conservative and predictable investment, bonds might be the way to go.

Wrapping it up: What’s your next step?

So, should you contribute to your super if you’re self-employed? The answer really depends on your personal financial goals, how soon you plan to retire, and how much flexibility you need with your investments. Superannuation can offer tax benefits and a disciplined way to save for the future. However, it’s not the most flexible option if you need access to your money before retirement age.

If super fits into your long-term plan, it could be a good tool to build wealth. But if you’re leaning toward more flexibility, you might find that a mix of investments – like ETFs, property, or bonds – works better for your needs. Whatever you choose, the most important thing is to create a strategy that aligns with your lifestyle and helps you stay on track toward a comfortable retirement.

Happy investing!