Why your super needs regular health checks

One of the most valuable things you can do for your super is to schedule regular check-ins. After all, you visit the dentist every six months - why wouldn't you do the same with your super?

"The one constant in life is change." I learned this lesson in my mid-20s thanks to one of my work colleagues. He intoned those words in such a way as to make them profound... as though he was Yoda and was imparting one of the secrets of the universe.

Change as the one constant is true - really, what else stays the same in life? Very little. And while the superannuation framework stays largely the same, albeit with the odd tweak as a result of policy changes here and there, life itself does not stay the same.

The life events that can affect your super

Here's a little list of 12 superannuation-review-worthy life events:

1. Starting a job
2. Changing jobs
3. Being made redundant
4. Starting a business
5. Winding up a business
6. Selling a business
7. Getting married
8. Separating or getting divorced
9. Critical illness
10. Birth of a child
11. Death of a partner
12. Death of a parent.

Each of these events has the potential to impact your superannuation, for better or worse, in some way. If you're in any doubt about how closely correlated life events are with superannuation, hopefully the following convinces you:

• Selling a business means your super could benefit from a CGT-free boost.
• Any life event involving employment, business or illness has the ability to either increase, decrease or cease your SG and salary sacrifice contributions.
• Getting married, separated or divorced all have implications for spousal contributions and spousal splitting.
• If you decide to have children, the birth of a child is going to impact your ability to contribute to your super if you step out of the workforce to care for the child.
• The death of a partner means that your superannuation may receive a boost if your partner nominated you the beneficiary of their super.
• The death of a parent means that some or all of any inheritance may be contributed to your super.

How many of the 12 life events in the earlier list have happened to you at some point in the last decade?

Now, another question - when was the last time you reviewed, or thought about, your superannuation strategy? Joining those sets of dots then... are you now going to be more proactive around checking in with your superannuation strategy on a more regular basis, rather than waiting for one of life's big events to force you to take action? 

How to give your super fund a health check

To make sure you're on track to reach your retirement goals, it's important to check in every six months or so. You can do that now by scheduling six-monthly reminders into your calendar. 

As part of your review, ask yourself the following:

• Has anything occurred recently in your life - such as a marriage or death - that will impact or change your superannuation outlook?
• Do you want to add or subtract any line items from your retirement budget? How do you feel about the amounts allocated to each of your activities - do they need to be increased or decreased?
• How are your projected annual income in retirement and your projected total super balance for retirement looking? (It's a good idea to take the average of three online calculators.)
• How is your super fund performing compared to others?
• How are your super fund's fees tracking compared to others?
• Are there any super-boosting tasks you meant to action six months ago? This could include starting a round-up scheme or setting up a direct debit from your bank account into your super.
• If you're in a new tax year, can you now take advantage of spousal contributions, spousal splitting, government co-contribution or LISTO?
• Have you received a bonus through work, an inheritance or other windfall, or a pay increase, which will allow you to contribute more to your super as a lump sum, or allow you to contribute more via salary sacrifice?

Regular check-ins can help prevent a super crisis

Another key benefit to checking in regularly is the ability to avert a crisis. An ocean liner cannot turn 90 degrees quickly; it changes course by making a series of small incremental changes. We can say the same about your superannuation; by checking in regularly and increasing your salary sacrifice here, or starting your direct debit there, you're able to fill in any gaps when it comes to your super balance. 

When you realise you've made some incorrect assumptions, and therefore will have a deficit of $75,000 in your super when you retire, which option do you choose?

• Option A - freak out.
• Option B - start looking for a second job.
• Option C - start preparing mentally for a miserable retirement.
• Option D - work out that to achieve another $75,000 by retirement, you need to increase your salary sacrifice by 5% and increase your after-tax contributions by 10%.

The answer is, of course, Option D. Because, even if you're in your 40s or 50s, you're still fortunate enough to have time on your side. Time is your friend and greatest ally when it comes to the superannuation race. And because you've created the habit of checking up on your super regularly, it's this habit that has saved you from having to seriously entertain Options A through C.

This is an edited extract from Rich Woman, Poor Woman (Major Street Publishing $32.99), republished with permission.