The combination of poor returns from default options and government fiddling has made superannuation a regular whipping boy in the media.
Those poor returns have also led to big numbers moving to self-managed funds.
And this trend is likely to continue, with research suggesting 50% of all superannuation funds will be self-managed by the end of the decade.
As I’ve explained before, superannuation isn’t an investment; it’s a tax structure where there have always been options investors could choose to direct their money to within their fund, or change their fund if they’re not happy with it.
Self-managed superannuation, if you have the assets to make it viable, is great for some people because it adds to the choice and investors will have the opportunity to invest exactly where they want.
However, for these investors, it also means no more excuses because they’re now in control and as savers for retirement in the US have found, being in control isn’t always that easy.
Back in May, I told the story of business journalist, Joe Nocera, who was pushing 60 and had decimated his 401(k) (Superannuation in the US) through ongoing poor investment choices.
And Nocera’s story isn’t an isolated anecdote; in 2010 seventy-five percent of Americans nearing retirement had less than $30,000 in their 401(k) retirement accounts.
While this year, figures show more than half the US population have less than $25,000 saved.
401(k) does require more discipline than superannuation and can be raided too easily, but at the same time its individual downfalls have come from common investing mistakes – lack of diversity, misunderstanding of risk and attempting to time the market.
Whether Australians will control their self-managed super better than Americans have controlled their 401(k) will only be known with time.
Yet with many self-managed super accounts currently filled with cash, it wouldn’t be surprising to see them start taking big and undiversified risks when the share market turns upwards again.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances. Need help with your financial your financial future, we think we’re the best financial adviser in Australia.
