Why is investing in superannuation early important?
Superannuation isn’t always on top of the agenda when you’re in your 20s and 30s. More interesting financial goals may include trying to stay on top of bills or get out of uni debt, afford trips overseas, saving enough for a deposit on a house, or maybe even dabbling in the world of high risk high return cryptocurrency. While it may be hard to justify putting your hard earned cash into a fund that you won’t have access to for years, the reality is that investing in superannuation in a smart way, will set you up for a comfortable retirement when you’re ready to stop working.
The benefits of investing in superannuation
Superannuation is one of the best long term investment options in Australia. This is primarily due to the fact that the Australian Government has lower tax rates for super fund contributions – usually at a maximum of 15%. Like any investment, the sooner you invest in your superannuation, the more the fund will accumulate over time, leaving you with a larger pot to live from once you’ve retired.
How much super should I have by age 30, 40, 50 and 60?
The amount of super you should have saved based on your age depends on what type of lifestyle you want to live once you reach retirement. That is, a modest lifestyle that is higher than the Aged Pension and allows for all the basics, or a comfortable lifestyle that allows for a higher standard of living including extras. Your ideal amount can also change based on personal financial factors like outstanding debts, or other savings or investments you may have.
In order to gauge how much you should have in your super balance, the Association of Superannuation Funds of Australia (ASFA) has developed a handy tool that allows individuals to estimate an ideal super balance needed to reach the ASFA Comfortable Standard balance by age 67. The below outlines the ideal super balances for individuals aged 30, 40, 50, and 60.
|Age||Ideal Superannuation Balance|
What are voluntary contributions?
If you find that your balance is lower than the recommended amount, or simply wish to make more contributions to your fund, you may consider investing in voluntary superannuation contributions. Voluntary contributions is money you put into your super fund on your own, from your after tax income. Making such contributions can not only boost your super balance, but can result in tax savings and Government bonuses or rewards in special circumstances. Most major superannuation funds allow for voluntary contributions. Voluntary contributions are capped at $27,500 for all individuals regardless of age. Major funds such as PSSap, GESB, Australian Super, Rest Super, ANZ Smart Choice, and Qantas Super all allow for voluntary contributions through payroll deductions, direct debit, or BPay, and have similar policies. If you want to contribute on behalf of a spouse, most companies require you to create an account on their super scheme, apart from Australian Super which allows contributions from other funds.
Superannuation offers a cost effective and sound long term investment that will hel-p ensure a comfortable retirement once you’re ready to stop working. Review My Super can review every Super Fund in Australia and can help you understand what YOUR money is doing for YOU!