As a Millennial you have time on your side thanks to the power of compound interest, explains Josh Alston.
Check out the table below and see how your current super balance compares to other Millennials.
Figures from The Association of Superannuation Funds of Australia’s (ASFA) October 2017 report 'Superannuation account balances by age and gender' show many young Australians are not likely to have enough money for an independent life once they stop working.
This means they’ll need to rely on the government’s age pension: the maximum weekly age pension payment for those eligible (including the maximum pension supplement and the energy supplement) is currently $453.80 a week for an individual and $684.10 for a couple.
Most people living on such an amount will need to seriously adjust their lifestyle to cope financially.
The good news is that by taking action now, you can improve your super savings for the independent life you want post work. Being a Millennial means you have time on your side to do this. Even small changes made now can add up to a big difference by the time you reach retirement age.
Millennials are the first generation to receive the full benefits of the superannuation guarantee (the compulsory amount your employer must pay towards your super), which is currently 9.5 per cent of your gross income.
According to ASFA’s Retirement Standard, the super balances required for a comfortable retirement are:
- $545,000 for a single
- $640,000 for a couple.
These figures assume you already fully own your home and are in good health. And that you will receive a part age pension.
ASFA defines a comfortable retirement as one in which you can take domestic holidays and occasional overseas holidays, go to restaurants, enjoy a good range and quality of food, take part in a range of regular leisure activities, have top-level health insurance, own a car and replace your kitchen and bathroom over 20 years.
ASFA’s Retirement Tracker can tell you whether you’re on track for a comfortable or modest retirement.
How to get on top of your super
Small changes you make now can lead to a big difference in the next three to four decades, significantly boosting your balance by the time you reach retirement age.
Here are five ways to help you get there.
1. Work out how much super you’ll have at retirement
There are several online calculators to estimate your super balance at retirement, including MoneySmart’s retirement planner. ANZ Smart Choice Super members can log in to ANZ Internet Banking and use the retirement calculator there. Once you understand the gap between what you’ll currently have and what you’ll need to retire comfortably, you can put a plan in place.
2. Make voluntary contributions
Any amount you contribute (in addition to your employer’s mandatory 9.5 per cent per year) will benefit you in the long run – and also comes with tax benefits (subject to contribution limits). Consider adding 3 per cent of your salary, or sacrificing part of your next pay rise or bonus into your super. With compound interest a 20-year-old who starts stashing away just over $6 a day could be a millionaire at 65.
3. Consolidate your super funds
If you have more than one super fund, consolidating them will save you fees and give you benefits from the investment earnings of a larger pool of money, while make it easier to keep track of your balance.
4. Check whether you’re eligible for a government co-contribution
If you’re a low or middle-income earner you could be eligible for a government co-contribution of up to $500 to help boost your super balance. There’s also a super tax offset available to people who earn less than $37,000 a year.
5. Work as a team
If you have a spouse they may be eligible to put money into your super fund and will receive a tax offset of up to $540. Check the Australian Taxation Office website to see if you’re eligible.
To make a concessional (before-tax) contribution, speak to your employer about salary-sacrifice.
For non-concessional (after-tax) contributions or personal contributions (on which you intend to claim a tax deduction – you must notify the fund). ANZ Smart Choice Super customers can make a contribution via BPAY.
Biller Code – 169060
Reference Code – member number (this is a combination of your ANZ Smart Choice Super BSB and account number.)