Communications professional Sam Aldenton (pictured) is playing superannuation catch-up after a four-year stint working as a journalist for a fashion and retail intelligence firm in New York after her graduation.
The 25-year old returned to Australia in early 2016 and embarked on a savings and investment regimen shortly after scoring a full-time role with the national travel agency Flight Centre.
“I’m very aware that I want to be financially stable when I’m older – I think that comes from looking at my parents and the way they’re set up; that’s had a big influence,” Aldenton says.
“It’s important to me to know that I can get myself into a good position, independently of a partner or anyone else, and that I’ve got an investment in my future that’s working for me.”
Aldenton moved back in with her folks to enable her to save a house deposit by 2019, and she is contributing $200 a month to her super on top of her employer’s compulsory contribution of 9.5 per cent.
It’s a top-up which should get her retirement savings back on track after her time abroad, during which time she made no contributions.
Make compound interest work for you
The mean super balance for Australians aged 25 to 29 was $16,441 in 2013-14, according to The Association of Superannuation Funds of Australia, the peak body for the sector. Those aged 20 to 24 had an average of $5118 in the retirement pot.
Compound interest – described by Albert Einstein as the eighth wonder of the world – means young folk who tip extra in early will be amply rewarded decades down the track, ANZ financial planner associate and fellow Millennial, Daniel Thompson, says.
“For people our age, retirement is so far away and there are more pressing, short-term priorities, like saving for a house or kids, so unfortunately super does tend to get pushed down the list,” he says. “A lot of the time, people think they need to do big drastic things but it’s those little changes, like putting aside an extra 1 per cent or 2 per cent of your pre-tax wage that can do a lot.
“You can put off doing anything until you’re a bit older or earning more, or the kids are in school but the truth is doing something small, but doing it now, can be more effective. I encourage people to start early, build the savings habit and increase their contributions over time as their income increases and they become more established.”
Salary sacrificed contributions are taxed at the concessional rate of 15 per cent, but annual limits apply. This means an extra $20 from your pre-tax salary being tipped into the pot each week will equate to the loss of just $13 or $14 in the hand, for those on average incomes.
Aldenton started taking her finances more seriously when she first returned to Australia from travelling.
“I was interested in making sure I was doing what I needed to, to move forward financially and part of that was making sure my super was in check,” Aldenton says.
“I’d worked two jobs part-time to save up to go overseas, as well as studying full-time, so I had a little bit of super – not much at all really. It wasn’t on the radar for me as a younger person; I was just focused on finishing uni and getting out of Australia as quickly as I could and super was very far down my list of priorities. So basically I was starting from scratch upon my return.”
Before deciding on her catch-up course, Aldenton read a book on personal finance and investment and sought professional advice.
“… he said it would be a good idea if I could add a bit on to the contributions my employer makes, to try to make up for those four years I was overseas and paying nothing,” she says.
Once committed, the funds are not missed, according to Aldenton.
“You can relate it back to how much you might spend on coffee in a week,” she says. “If you bought one coffee a day, every day, at work, that can be over $20 a week. It’s not that much – for me it’s quite affordable. It doesn’t have to be a big amount, it just has to be something, and over time compound interest will work.”
She plans to review her account balance later this year and hopes to be in a position to increase her contribution within the next couple of years.
“I’m in a stable job and want to set myself up for the future so there’s no reason not to be thinking about my super.”
Want to be independent and have the choice to fly solo? Follow Sam’s steps
- Identify the financial goals you want in life and seek advice to fulfill them
- Set yourself up to achieve them, e.g. cut rent to save for a deposit
- Make it a habit to add extra to build your super balance
Want to know how to make a contribution?
- To make a concessional (before-tax) contribution, speak to your employer about a salary-sacrifice arrangement
- For non-concessional (after-tax) contributions, ANZ Smart Choice Super customers can make a contribution via an easy BPay payment.
Biller Code – 169060
Reference Code – Member number (This is your ANZ Smart Choice Super BSB and account number.)