An Australian returned from a trip abroad to make a disturbing discovery: her balance was exhausted.
It’s fair to say that there is growing skepticism about super funds among younger generations, and it has nothing to do with their ability to plan ahead.
For older generations, the retirement pension was a promise to live well in retirement by paying a regular amount in each paycheck. Millennials and Gen Z find themselves without this comfort, the age of financial possibility to retire getting older as retirement costs continue to rise and a quick glance at any retirement calculator may bring up some rather discouraging figures.
Add to that the huge blow that many young people have seen Covid-19 take their savings and wow, and it’s pretty easy to see why they would be disheartened.
From a non-financial perspective, there is also a growing awareness of how super funds invest our money and our moral agreement with the companies they support.
A recent study commissioned by NGS Super found that while only 15% of Gen Z want to invest more in their retirement nest egg and 41% don’t care who their Super is with, only 22% said they spend time. about their finances. was the thing they least preferred to do.
So overall, they don’t lose interest in finances, they just don’t pay much attention to pensions. Why is that?
Rachel Horan, a 21-year-old financial reporter at Savings.com.au gave up super funds after hers ran out of everything she had when she spent a year living and working in Europe.
“When I was 18 I saved between $ 15,000 and $ 20,000 and then I lived in Europe for a while, traveled and worked,” she said.
“[At the time] I had a great fund that my old job had created for me. By the time I returned, the entire account balance had been emptied of fees [which] just put a bad taste in my mouth on super funds in general, ”she explained.
“And self-directed super funds are a whole different box of worms. I don’t know if I would have the time or the skills to manage one. This is why I would be more inclined to [look at investing] to support my future, because I don’t really want to give more money to people who I think don’t really have my best interests at heart.
She’s not the only one who doesn’t trust super funds. Zara Venturato, 22, has just started a full-time contract (although she has worked full-time for a while) takes pride in her ability to save and even does her own research on super funds – but does still not confident in their ability to cover his retirement.
“I don’t really believe Super will fully fund my retirement, so I think I’m going to have to make my own investments,” she said.
“But it’s also something that I find a little scary. I feel like Gen Z is pretty savvy, but with all the information out there, it’s pretty hard to know where to start, ”she continued. “Ownership is the number one concern I hold dear as I feel like it will lead to my retirement. “
Like Rachel, she also found herself stung by super fund fees when she started working, which added to the mistrust.
“When I started to get super it was pretty close to being in the negative because I had to pay such high fees.”
So what is the problem? Is it a bad thing to rely on other sources, like investments, to live the retiree life you want? And is Super a concept that cannot keep up with the times?
The answer seems to be both yes and no.
“The basic concept of retirement pensions is that you have to invest money for your retirement, otherwise you will probably never be able to retire,” says Paridhi Jain, founder of financial education company SkilledSmart.
“That’s it. That’s all the pension is. It’s obsolete? No. Is the branding and marketing of most super funds obsolete? Probably yes. But don’t. let’s not throw the baby out with the bathwater.
While Jain believes the retirement pension is key to making sure people save enough money for retirement, especially if they don’t feel comfortable investing, she agrees there is. room for improvement.
“Of course there are drawbacks and possibilities for change,” she explained. “It’s a changing area, and it’s one of the risks that some people worry about, that by the time you get access to your retirement funds, the rules will have changed again.”
When speaking to Stephen Huppert, an independent consultant and advisor who often works with super funds to help improve retirement outcomes, he noted that super is mandatory, so you should always pay attention to it. .
“You could absolutely [retire on investments], but if you are employed by someone, you have no choice. Ten percent of your salary goes into a super fund, ”he explained.
“So my advice to kids is what fund you’re in… make sure you’re in a good fund and make sure the money invested in super is money you have an active interest in managing. . “
“Anyone who thinks of saving should think of a range of time horizons,” he continued. “So you should be saving for the short term for a house deposit, but you should also be saving for retirement. It’s a balancing act.
So how do you manage your super? Unlike investing, which depends a lot on your personal circumstances, there are general rules for choosing and managing your super fund – and it doesn’t really depend on which funds perform best for the year.
“First of all, it’s important to understand that superannuation is just a fancy word for ‘investing for retirement,’ says Jain.
“So what are the things that you would want to consider if you were reviewing your investments? You would like to understand the returns, the fees you pay, how the returns and fees of your fund compare to other funds, what your money is actually invested in, what portfolio are you invested in and is it aligned with what your risk profile and investment objectives are? “
“The best advice I have for newbies who feel intimidated by understanding their super is: start small. You don’t need to know everything about superannuation all at once, but if you just start educating yourself a little bit you will start to gain confidence and make better decisions and that will add up with the time.