Source : the age
Even before the re-election of President Donald Trump, superannuation had long been one of the financial topics I was asked about the most. That’s because most Australians are extremely proud of our superannuation system and the quality of life it provides the vast majority in retirement.
It’s also the carrot dangling at the finish line, offering us hope and promise for our lives after decades of hard work.
A healthy super balance is what many of us have to look forward to after years of hard work.Credit: Dionne Gain
Since Trump’s return to the White House, I’ve had a tenfold increase in the questions I get on this topic dealing the global economic volatility brought on by the mercurial president.
With our national superannuation assets equalling $4.1 trillion as of December, and 77 per cent of all Australians holding a superannuation account, it’s little wonder people are feeling on edge.
But how do you keep calm and carry on when plotting your financial future, once somewhat predictable, suddenly becomes like reading tea leaves? Here’s my advice.
1. Remember these rules of thumb
There are two important things to remember when checking your superannuation balance. The first is that even with volatility, your balance should double every seven to 15 years.
Taking a deep breath and considering your options with a clear and cool head before making any decisions are vitally important.
Using “the rule of 72”, where you divide the number 72 with your annual return, you can approximate the years it should take for your balance to double. For example: 72 ÷ 10 = 7.2 years.
The second: According to the International Monetary Fund, global recessions occur at eight to 10 year intervals. In other words, though economic turbulence understandably leads to us stress, this kind of activity isn’t only normal, it’s expected.
And because it’s cyclical, you can trust that with every dip, a rise will come at some later point.
2. Check your employer contributions
This might seem painfully 101, but consider this: small businesses currently make up 97.2 per cent of all businesses in Australia and employ more than 5.3 million Australians.
And according to the Australian Tax Office, in the 2023-24 financial year alone, the amount of unpaid superannuation contributions – super that employees are lawfully owed but are yet to receive – was $5.2 billion. If you’re concerned that you have outstanding superannuation, the ATO can help with investigating and retrieving it.
3. Review your risk profile
Most Australian superannuation funds have three risk profiles: conservative, moderate and aggressive. In choosing a profile, you’re instructing your fund how you’d like your super invested, and deciding how much of a risk you’re comfortable taking.
Maybe you want to wait things out and play it safe, perhaps you’re feeling confident, or you could be comfortable taking the middle ground.
Whatever the option you choose, it’s good to know where you’re currently at so that you can stay or change.
4. Assess your diversity
Recently, a friend was lamenting how much her superannuation funds had flat-lined, not just because of the economic response to tariffs, but also because of what her super was invested in.
Without going into too much detail, it’s safe to say that what she had chosen to invest in doesn’t align with the priorities of the current US administration. And this is why diversity is so important.
In a nutshell, diversity is spreading your investment over different assets such as real estate, bonds, shares and cash, which come with different risk profiles. This approach means that if the value of one asset falls while other assets are stable or performing well, you’re OK.
For my friend, that meant staying with the same ethical super fund, but not putting all of her eggs into the one investment basket.
5. Don’t withdraw prematurely
When my friend was considering her options, her knee-jerk reaction was to withdraw her super and move it to another fund and change her risk profile.
Trump’s election to the White House has sent super earnings into a spin.Credit: Bloomberg
This is a natural response, but taking a minute before making any major decisions is important.
Most of us will work and contribute to our super for roughly 45 years. In real terms, that’s at least four recessions (per the IMF’s calculation), 11 US presidential terms and 15 prime ministerial terms.
In other words, economic uncertainty driven by politics is a sprint, but superannuation is a marathon.
6. Let the facts guide you
Australian super funds lost 4.5 per cent after Trump announced his initial tariff plans. Last week, this masthead reported that the latest figures from SuperRatings show that most funds are on track to record returns of about 6 per cent for this financial year. That means that returns have come back to where they were before the president’s inauguration.
Another important story was about a sophisticated misinformation scam currently targeting pensioners. The scam claims new super rules are set to be introduced on June 1, 2025 that include, among other things, phased withdrawal limits imposed on pensioners.
As Bec Wilson noted in her article, though the scam is slick and confidently written, it is “utterly made up”.
7. Stay focused on the long term
Our emotions are powerful things, but they can play havoc with our decision-making abilities, particularly during turbulent financial times.
Of all our hard-earned assets, superannuation is perhaps the one we’re most closely tied to because it signifies the finish line of our working lives. Understandably, when that feels at risk or under threat, we panic.
But taking a deep breath and considering your options with a clear and cool head before making any decisions are vitally important. If you feel that you’re unable to do that, it’s worth seeking the advice of a professional, who can help you better understand your options, and may present a different perspective.
Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.
