How to make your super grow

Super is about funding the life you want after work. Here are some proven ways to achieve that.

One of our most asked questions from smartMonday members is how they can get their super to grow.

There is no magic answer to this, but here we’ll outline ways you can manage your super so it becomes the asset you need to live your best life after work.

Firstly, start thinking the right way about your super.

“Super is a long-term investment. It really is. It’s a lifelong journey of investing to have the money you need for your life after work (what we at smartMonday call your ‘weekend’),” says smartMonday head smartCoach Matt Davey.

Just like in your actual life, you’ll have ups and downs along the way, but if you focus on your goals you have a better chance of achieving them. (If you haven’t thought about your superannuation goal you can start by reading our article Do you really need $1m to retire?)

“Another point to make about the long term is that compound returns significantly impact how your super increases over the decades it accumulates. Each year the returns you earn in your super earn further returns and keep building, year on year. Over 30 years or so that really adds up,” explains Davey.

And making further contributions along the way will really boost this.

Do you have a goal for your super? Know how much you need to live the life you want after work? Guidance can help resolve these questions.

There’s a number of ways to contribute to super, so here we’ll list the most notable ones:

• Before tax you can contribute $27,500 (the ‘concessional cap’) to your super each year and it will only be taxed 15%. That’s much better than income tax rates between 19% and 45%. So, if you can afford it, consider adding what more you can – you’ll boost your future savings and cut your tax bill.

• Catch up on previous years if you’ve contributed below the concessional cap in any financial year from 2018-19 onward. You can only do this if your total super balance is less than $500,000 at the end of last financial year and if your extra contributions mean you’ll exceed the $27,500 cap this financial year.

• After-tax you can contribute far more, up to $110,000 without paying further tax (for most people). If you come into a windfall you can combine that limit for up to three years ahead and contribute $330,000 all at once.

• Your spouse can contribute to your super. In some cases there can be tax advantage to this. Review our article Use super to support your spouse for more information.

• Low-income support is available from the government. It will apply a tax offset automatically if you’re eligible. And it will make a co-contribution direct to your fund, also if you’re eligible.

• Downsizer contributions are a special case with a few conditions that allow you to contribute $300,000 from a home sale to your super, or more if you’re a couple.

The right investment strategy will protect and build your wealth. When it comes to your actual investments there are two key questions.

Is your fund delivering the level of returns you need to grow your super? By looking at long-term returns you can see whether your fund is performing for you.

"Keep in mind that in the short-term investment performance can go up and down due to many factors, such as interest rates. For example, there were poor returns across almost all investment markets during calendar year 2022. While this year investments have performed far better,” explains Davey.

Generally, higher risk investment options deliver stronger returns over the long term. So, when you’re young, these options can be a good choice. As you get closer to retirement and preserving what you have becomes important it can be advisable to become more defensive in your investment choices.

Think about how much risk is right for you to take on at your life stage. You can start by reading our article Building wealth is all about risk.

An overlooked but crucial step in making your super grow is to bring it all together in one account.

There are at least three main benefits in doing this: you pay less fees, which means more money for you; a higher balance means greater compound returns for you; and managing your super becomes easier.

“These three factors make a powerful difference in how your super will grow in the long term. They are among the most important steps a member can take to benefit their future,” says Davey.

Don’t forget that when you close an account you may lose existing insurance unless you can transfer it to your destination fund. There’s a few other issues such as tax and contributions you should consider before consolidating.

Lastly, it’s worth checking if any of the billions of dollars in lost super out there is yours. You can use your myGov account to get the ball rolling on that.

For many Australians, superannuation is their biggest asset (perhaps outside of the home they own). That makes it very important, and you should give it the attention and care an asset like that deserves.

But it can be complex to figure out the right contributions and investments, before you even start looking at insurance and other important matters such as beneficiaries.

“This is where our smartCoaches can be a valuable resource for you. This is our in-house team, who, at no additional cost to you, can help get your super in better shape,” says Davey.

smartMonday smartCoaches will help resolve confusion and can offer guidance in sorting out essential matters.

You can also consider seeing a financial adviser. While their advice will come at a cost, they can offer guidance in setting a long-term strategy to meet your goals.