Accumulating a sufficient amount of super to resource you for a purpose-filled retirement is a key financial goal. The industry recommendation is to have at least 65 percent of your annual income as retirement income to be able to live comfortably during retirement. Choosing the right investment approach for your super is important to make sure you get the most out of the time you have for your super to accumulate and grow. We call this amount of time your ‘investment horizon’, and believe that taking a ‘seasons of life’ approach to super investment ensures Christian Super can give you the most successful outcome for your retirement finance.
Entrusting your super to be managed by a super fund that will only invest it in ethical organisations and projects is one of the ways you can ensure you have equipped yourself for retirement without having to compromise your values as a Christian. Achieving strong investment returns on your super is important for you to be able to enjoy a resourced, purposeful and joyful retirement.
You invest ‘ethically’ when the investment products included in your fund reflect your core values. This means that they contribute to society and the environment positively in some way, or that they promote beneficial outcomes for communities – as well as delivering competitive returns. At Christian Super, we believe in the authority of God, having respect for human life and the importance of caring for all of God’s creation – and these beliefs are reflected in the projects we invest in.
When choosing where to invest your super, we take a number of factors into account, such as the labour standards of the organisation and the related social, environmental and ethical considerations. We avoid investing in companies that engage with gambling, pornography, weapons, alcohol and tobacco, child labour, embryonic stem cell research and fast food production.
Considering your investment options
Most retail super funds offer different investment options to cater to different priorities, financial requirements and life stages. You can choose from options such as high growth accounts, balanced strategies, or more conservative approaches, or you can also choose to spread your super balance across these options.
When you’re choosing how you’d like to invest and how to allocate your super balance, you should consider various issues such as your acceptable risk level, the specific returns you’re seeking, the duration of your investment (age and time to retirement), and your overall financial situation. You’ll also want to consider your Christian financial philosophy, the current economic climate, and the advice of your financial advisor.
As such, the younger you are, the more likely you might be to choose to concentrate your super money in high-growth options – which are also higher in risk – because you have more time to ride out the troughs in the economy.
If you’ll be retiring fairly soon, however, you might be seeking a safer route for protecting your funds and reducing exposure to risk by investing in lower-return investment products, which are known as defensive assets.
Investing according to your stage of life
By investing according to the stage of life you’re in, you take a ‘seasons of life’ approach that matches your risk profile with your current financial commitments and other life priorities.
You can start putting away money in your super fund as soon as you start earning money, and this might be in your teens. If you’re making more than $450 a month, you qualify for the 9.5 percent Superannuation Guarantee, which means your employer pays 9.5 percent of your earnings into a complying super fund or retirement savings account.
Since there is such a long-term horizon to retirement at this stage, you’ll probably want to choose either Christian Super’s ethical growth and ethical high growth options.
Builder strategy: 18 to 45 years of age
During this stage, you’ll be gradually maximising your income, especially when you reach your forties. Make sure you consolidate any multiple super accounts you have so you don’t lose part of your super to fees. Many people opt to maximise their super contributions or to salary sacrifice extra money, however you’ll probably be balancing this approach with other financial commitments, such as saving up for a deposit, paying your mortgage, and having children.
You’ll probably be taking more risk during this period than at other times in your life, because you have a significant amount of time before retirement and you’re enjoying peak earning power, so you can afford a bit of additional risk in exchange for possible higher growth.
Given the investment horizon to retirement at this stage, the right investment products might be ethical growth, ethical high growth or a combination of the two.
Planner strategy: 45 to 60 years of age
The 45 to 60 years of age stage is when you’re in planning mode for retirement, and you start to gradually reduce your debt and expenses. Paying off your mortgage is probably a key priority, and expenses such as school fees and family living costs may start to decline at the end of this stage as your children slowly start finding their own feet as adults.
Once you reach your fifties, you might be looking to accelerate your super contributions, and your approach might value maximising contributions over reducing your debt, especially if you’re currently receiving a high income. You might be starting to look at ways to preserve and protect your super and shifting the focus from higher growth products, so Christian Super’s ethical growth or ethical balanced, or a combination of the two, could be suitable for this stage.
Consolidator strategy: 60+ years
At this stage you’ll likely be in a consistent, stable financial situation and in the process of making retirement decisions. The sixties will be a tax-free age for you because you’ll be able to withdraw lump sums tax free, and your investment returns held in your fund will also be tax free if you’ve started to withdraw your pension. Even though you’re not paying tax on your super investments, you should still have a good investment strategy to protect your retirement nest egg.
By the time you reach your eighties, you’ll no longer be able to make new contributions to your super, so you’ll be living off what you have contributed (and any other assets you have outside of your super fund).
Given the short time horizon to retirement at this stage, the ideal investing strategy for your super during your sixties and beyond is likely to be either Christian Super’s ethical stable or ethical cash strategies, or a combination of the two.
Choosing the right super strategy for your life stage
Your super investment strategy should reflect your unique circumstances, including your age, goals, current financial commitments, and tax requirements. Make sure you regularly review your super investment strategy just as you would with any other investment, and seek professional advice if you have any questions.