Getting on top of your super is one of the easiest life-admin tasks to put off. I get it, the idea of retirement seems so distant for most young people that placing mental energy into it now may feel wasted.
However, the option to forget it exists really isn’t beneficial if you’re looking to set yourself up for long-term financial security. Sussing out how much super you have and how much your employer is paying is a straightforward place to start – seriously, it’s a max 5-minute job.
From there, you’ll be able to gather whether you should start to make additional contributions to your little nest egg of future cash because even the smallest additions now can make the biggest difference in, say, 40 years. I don’t know about you, but the thought of clocking off from labour long before becoming a wrinkled prune to a carefree existence in which I spend my time sipping on cocktails and lounging around sounds pretty good.
Since there’s ~a lot~ to unpack, we had a chat with Renae Anderson, CareSuper’s Head of Financial Advice about just how much contributing extra to your super fund now can help you out when the time comes for retirement. According to Renae, there’s no real ‘recommended amount’ of super you need because everyone’s expenses are different at different times, so don’t get bogged down by this idea that you have to have a certain amount by a particular time – it’s your financial goals and your future, so do your research and devise a plan that works best for you. Renae says one thing you have when you are young is time – which can be a ‘super’ power.
What are the benefits of contributing to your super?
I’m going to throw it back to Year 9 Maths here for a second and reintroduce the phrase ‘compound interest’. Compound interest is basically the interest you earn on your initial deposit (in this case, super) and the interest earned on top of that new amount (if you leave it invested). As Moneysmart put it, it’s ‘interest on your interest’, meaning the earlier you save super, the more interest you’ll earn on it.
This is why contributing extra to your super in small amounts will benefit you in the long run – the longer you leave it invested and add to it, the more compound interest it’ll earn, therefore meaning more money-growth without technically actually having to do more work in the long run.
“One way to contribute to your own super is by salary sacrifice. It could help you save on tax. You could ask your employer to salary sacrifice part of your before-tax salary into your super on top of the legislated 9.5%,” suggested Renae.
According to Renae, another benefit of contributing to your super includes reducing your taxable income, potentially reducing how much tax you pay.
“It’s a tax-effective way to boost your super over the long-term. Instead of paying tax at your marginal rate, you’ll only pay up to 15% tax on your money as it goes into super (if you earn under $250,000 per year).”
How can you contribute extra to your super?
So, if you’re keen on earning some sweet compound interest, and potentially reducing your taxable income, Renae recommends thinking about contributing extra to your super.
You could also make ‘after-tax’ contributions, which is when you contribute to your super from your bank account after the money has been taxed.
According to Renae, a simple way to do this is to directly BPAY the contributions to your super fund from your bank account (hot tip: you’ll be able to claim your contributions as a tax deduction if you use this method).
“If you are working part-time or casually and you earn less than $37,000 you may be eligible for a low-income superannuation tax offset (LISTO) of up to $500 per year. This can also help boost your super,” Renae also explained.
Using online tools such as those on the MoneySmart website, or the ones on some super fund websites like CareSuper’s spare change calculator, gives you a picture of what certain amounts of weekly or monthly savings could mean for you in the future.
What are the best ways to take care of your super?
Growing your super is obviously a long-term, ongoing journey – unless you experience a record-breaking spike in your bitcoin investments over the next few weeks, you’ll likely be working for a while and in turn, dealing with super too. Renae also mentioned a few simple ways young people can keep track of their super, on top of making small contributions.
- Ensure employer contributions are going into your account (if you’re earning more than $450 per month).
- Check how much super you have and consider making voluntary contributions.
- Consider consolidating your super accounts so you’re not paying extra fees on multiple accounts.
- Don’t wait until you’re nearing retirement to find out you don’t have enough. Time is a ‘super’ power.
- Don’t switch investments without talking to an adviser. Most funds offer this service as part of your membership.
There are also a bunch of tools on websites like MoneySmart or super funds like CareSuper. It can be a daunting thing to confront, but we’ve got so much info at our fingertips so make sure you make the most of it all if you’re looking to back yourself for your future. It’s also important to remember there’s no shame at all in asking an advisor or someone you trust for help – at the end of the day we’re all figuring this out as we go along, and the more expert advice you’ve got, the easier figuring these things out will be.
The information provided in this article is general advice only and has been prepared without taking into account your particular financial needs, circumstances or objectives. You should consider your own investment objectives, financial situation and needs and read the appropriate product disclosure statement before making an investment decision. You may also wish to consult a licensed financial adviser.
CARE Super Pty Ltd (Trustee) ABN 91 006 670 060 AFSL 235226 CARE Super (Fund) ABN 98 172 275 725
