ASIC releases super guide and compares SMSF with other funds
A guide for imminent and future retirees on superannuation investments has been released by ASIC.
Financial Decisions at Retirement helps people make informed decisions about super funds and investments and the financial choices available to people at retirement.
“It will help people decide what to do with their retirement nest egg. It has been extensively user-tested to ensure it meets the needs of people on the verge of retirement,” says ASIC chairman Greg Medcraft.
It details the basics of super funds including the different types available and how and when they can be accessed and then provides in-depth advice on financial decisions.
The guide includes tools for judging the performance of retirement investments, which gives advice on how to assess whether a fund will perform well.
It says past performance is no guarantee of future returns; today’s top-performing funds tend to fall back to the average over time, but consistent poor performance can prove hard to turn around.
As part of this guide it provides a worksheet for comparing three investment funds based on benefits, fees, insurance, investment options and performance.
An alternative to super fund companies is to run a self-managed investment fund, for which the guide recommends a minimum starting base of $250,000 to be successful.
An overview of investment strategies is presented that defines growth, balanced, conservative and cash strategies and how they distribute investment. The guide says growth funds, with their high percentage of investment in property and stocks, have historically given the best returns, and cash funds are only slightly better than inflation.
Many people work several jobs in their lives and opt for the default super funds in each instance, leading to many super accounts. The guide explores how to merge many super accounts and discusses how to find lost super funds. It says 6.4 million accounts totalling $12.9 billion are lost or in inactive accounts.
There are certain circumstances where access to super funds is granted before preservation age, and the guide lists these conditions, which can include severe financial hardship.
Alongside this launch ASIC has updated its MoneySmart Retirement Planner, an online calculator that shows people how to boost their retirement savings.
“The MoneySmart Retirement Planner provides people with an estimate of how much they are likely to have in every year of retirement and even calculates the best way to make extra super contributions,” Medcraft says.
The calculator works out your super balance at retirement and then works out the impact of fees and additional contributions on that balance.
“People need reliable and trustworthy information to help them make confident and informed choices for their retirement money. The new tools are easy to use and empower people to get the most out their retirement income,” says Paul Clitheroe, chairman of the Australian Government Financial Literacy Board.