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How can I retire with $1 million-plus?

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I have around $125,000 in my super fund and my wife has about $65,000 and we’re not happy with our super fund’s performance. How can we rank our fund’s performance and then make a decision that’ll help us build up our fund to over a million dollars by time we retire? I’m 40 and my wife is 39.

Let’s just say you and your wife work to age 65 then your super money, which combined is now $190,000, would double every nine years, provided your fund can average an eight per cent return per year. So by the time you’re 49, it would be $380,000. By the time you’re 58, it’d be $760,000 and by age 67 it would be $1,520,000! Throw in your contributions between age 40 and 65 and you’re heading towards $2 million or more!

Now these calculations are based on eight per cent returns and it means you have to have a super fund that nets these kinds of results. I’d recommend looking at super comparison websites, such as superratings.com.au or chantwest.com.au, to see what the best funds have been doing and how yours has been performing on a relative basis. The best fund for the past three years has been QSuper Indexed Mix, which has come up with 7.89 per cent. The lowest for fees was a First State Super product, which was only 172 basis points, but the likes of Sun Super on 372 basis points and Australian Super on 388 basis points gives you an idea of what some of the top 10 and well-known funds are charging.

Also, make sure you look at your current insurance policy linked to your super fund, and make sure you can end up with an alternative policy that is as good, if not better, when you make the switch. This is an important consideration if you’re thinking about starting up a self-managed super fund. As you will have to arrange for a life insurance policy to go with your super fund if you want to be in a better or at least an equal position compared to where you were before making the switch, then you have to weigh up your alternative insurance situations. For info on self-managed super funds have a look at my new website and newsletter for SMSF called the Switzer Super Report. We answer a lot of questions about SMSFs.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, January 19, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

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