Ask Paul: I’m 35 and only have $6000 in super

Dear Paul,

I'm a 35-year-old single woman with a $6000 super balance due to working for family for so many years. I am starting a public service job and hope to stay in the public service. 

I have been advised that I can now join a public service super fund or remain in my current fund, AustralianSuper. Both accounts have pros and cons. 

I come from a financially illiterate family and feel unsure of the best way forward for me. 

I could also use some tips on salary sacrifice to both improve my woeful super balance and for the first home buyer scheme.

A little advice would be priceless. Thank you. - Sally

Yours is a pretty common situation, Sally. Working, presumably, in a smaller, family-owned business is rarely good for your super.

The bigger issue here is that your new employer, the government, will pay into whatever super fund you choose. I am going to ask you to do a quick list of the pros and cons of the PSS fund you are being offered and AustralianSuper.

My guess is that AustralianSuper will offer you more investment options. This is important.

You are investing with a term of around 30 years. The one thing that helps with risk in investment markets is time.

So, in your shoes, I would be going for a high-risk option, investing mainly in growth assets - shares, property, infrastructure and private equity.

The first step is to compare the higher-risk options in your PSS fund and AustralianSuper and look at long-term returns.

Next, of course, are fees. I suspect you will find these pretty similar. Then we move to an important area, insurance. Here I suspect a PSS fund may give you better cover, possibly at no cost to you.

Once you suss out these three key areas, I know you will quickly come to the right conclusion.

Next, home ownership. Salary sacrifice will certainly boost your super in a tax-effective way. But I reckon you want to own a home before you retire, so here I agree with you about the first home buyer scheme.

A state-based first home buyer scheme is definitely worth considering, as is the federal First Home Super Saver (FHSS) scheme, where you can make before-tax contributions to your super, up to $15,000 a year, and withdraw up to a total of $50,000 to buy a home.

But the key here is how much you can save. Retirement for you is many decades away. I would argue that your order of priority is to, first, determine your savings capacity; second, take a look at the FHSS scheme and also first home buyer initiatives in your state. Then start saving!

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