I have recently joined the work force and set up a new super fund. I am trying to decide which investment strategy I should choose under my super fund. What risks are associated with investment under a super fund and what should I be aware of?
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Answer by Neha Sharma, Hillsdale 2036 NSW
- All investments under a super fund come with a risk. The only difference is the level of risk.
- Some of the risks associated with investments include:
- your super fund balance may not be sufficient for your retirement. You should consider getting financial advice regarding how much super is necessary for your retirement. You can use the Retirement Planner available on the ATO website to calculate how much super is appropriate for retirement. It is accessible through https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/retirement-planner.
- As a general estimate:
- $300,000 super is sufficient for a single person with limited liabilities;
- $750,000 super is sufficient for a couple with medium liabilities;
- unless you are in a defined benefit scheme returns are not guaranteed and you may lose some of your money. This is largely dependent on how your fund invests the money;
- the value of investments fluctuates over time and therefore previous returns do not offer a clear prediction for the fund’s future performance. To get a clearer picture about the funds investment strategies it is advisable to read the product disclosure statement carefully and see the long-term performance of the fund; and
- superannuation law and related tax law are complicated areas of law and non-compliance can cause serious issues for individuals particularly for those managing a SMSF.