Australians lack understanding of super savings risks
AustralianSuper has found many super members are choosing the wrong investment option because they do not understand the key risks.
Its survey of 800 18-64 year-olds found that half of young people aged 18-34 would choose an investment option labelled 'low risk' where many such investments may not earn much more than the rate of inflation.
Less than a quarter of people recognised there were two risks when it came to superannuation savings - volatility and inflation, it said.
AustralianSuper's research found that a young person investing in an investment option labelled 'very low risk' for 40 years could be up to $170,000 worse off at retirement than if they chose a growth investment option labelled 'medium to high risk'.
Of the young people surveyed, 29 per cent did not know what a 'low risk' investment option was, or thought it would provide enough money in retirement.
Many people do not understand the impact of both types of risk, according to AustralianSuper general manager marketing and communications James Coyle.
"For a 55-year-old who is not going to keep their super invested in their retirement, a 'low risk' - that is a low volatility option - may be part of a sound investment strategy, but for a 25-year-old who has another 40 years of saving ahead of them, choosing this option could be disastrous," he said.
Coyle said it was important that Australians assess both key factors in line with their savings timeframes.
"Investment risk is relative to the individual and needs to be considered in terms of a person's ultimate savings objectives and timeframe," he said.
AustralianSuper found that less than half of Australians would seek information on 'high risk' investment options, while 25 per cent said they would change out of an investment option that was labelled 'high risk'.
The industry fund has called on all super funds to include inflation, which is a long-term risk, on their risk labelling, along with short-term risks such as volatility.
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