Stop what you’re doing. Go and put the jug on. Make a cup of tea and get comfy. We’re about to have a nice chat about something really exciting- your future
Regardless of what industry you’re in, you’re probably hoping to retire one day. And when you do, it’s time to finally crack open that superannuation- huzzah!
In Australia, your super account is the single most important saving tool you have to prepare for retirement. We bravely suffer through watching money disappear from our pay slip week after week and trust that the fund we’ve chosen will keep it safe for us until the time comes. So what would you do if you finally got access to your retirement savings and found over $300,000 missing?
If you’re a millennial investing with a high-fee super account, that’s the figure you could have paid in fees to your super fund by the time you reach retirement age. That means that there could be over a quarter of a million dollars that Future You won’t have to spend, thanks to your Fat Cat account manager, who is probably laughing all the way to his third beach house.
So what’s a Fat Cat fund? That’s the name given to funds that “performed worse than their peer group over one, three and five years and under-performed by more than 10% over the entire period.” Fat Cat funds in Australia are managing over $45.5b of our money, and happily charging over $600m in fees.
Speaking of fees, most Fat Cat funds have higher fees across the board- if you’re currently with one of these funds, you’re probably being charged around a 1.9% fee for the privilege of their name on your statement. Think 1.9% doesn’t sound that bad? Over the next thirty years of your career, it could mean the difference between having $846,957 at retirement instead of over $1,178,081 if you had moved to a lower-fee fund now. That’s over a quarter of your potential retirement moolah (and as they point out, quite a few trips around the world).
With the combination of high fees and low returns, Fat Cat fund members are paying a cracking 24% of their annual return in fees, instead of the 8% that members with Fit Cat funds are paying. Is anyone else getting cold sweats yet?
Do you see how much bigger that green bar is? DO YOU??
Ladies- like most things in life, the news is even worse for you. Thanks to the 15% gender pay gap for full time workers in Australia and likelihood of you taking time off or switching to part-time work to raise a family, your superannuation account is probably going to be much lower than most men. Having your super invested with a Fat Cat fund on top of that can put you at risk of entering retirement without the necessary means to live comfortably.
That difference in the green bars above? That could be the gap between living happily in your golden years and being literally unable to live a comfortable retirement. That’s scarier than anything I saw this Halloween.
So what can you do?
The news isn’t all doom and gloom. You’ve already got your cup of tea ready- you’re set to take care of this now. Not tomorrow. Not next week. Not when you’re ten years/five years/one year from retirement. Make the next ten minutes the highest paying tea break of your life and move your super to a fund that is going to be doing it’s best for you, not their bottom line. With most funds, a few clicks will be all it takes for them to handle the transition for you. To quote my world-famous anti-procrastination technique- shut it down, suck it up, and get this done. Future You will thank you for it.
Please bear in mind that I am but a humble actress with a passion for finance. If you feel unsure about anything to do with your superannuation, it’s best to consider your individual financial goals and circumstances, and even consult with a professional. As long as you do something. Please. Your future is something too serious to be put off.