Oh, superannuation, how we love to loathe you. It’s hard to see the pay off when you’re young, don’t have retirement even close to your radar, and you’re just trying to pay rent while living in an expensive city. I always wished I could have those super contributions in my take-home pay instead. That’s until I realised it’s actually doing me a favour in the long run.
How did I come to this realisation? Pull up a seat, I’ll explain. A few years ago, some relatives of mine hit the golden age where superannuation is no longer taxed (more on this later). So, knowing they had a comfortable buffer, they managed to retire from their high-stress jobs, pay off the last little bit of their mortgage and still had enough left in the fund to supplement their casual income.
Sounds sweet, no? Well, they didn’t do anything wildly savvy. All they did was make some tiny superannuation contributions over the course of their lives. That’s it. That was the secret. With this in mind, keep on reading to find out exactly how much cash you could have in the bank one day, thanks to a little thing called super.
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First up: why super contributions are basically bonus money for later
Sure, you might feel like you’re losing money to the elusive superannuation fund in every paycheck, but that’s actually far from the truth.
First, if you’re the average working Aussie (i.e. someone over 18 years of age who earns more than $450 per month), your employer is obligated to contribute into your super account, but the wonderful news is that it comes out of your pre-tax pay. That’s right. By law, your employer must contribute at least 9.5% of your ordinary earnings to your super fund.
Our advice? Instead of focussing on your own money that’s coming out of your pay, try to remember that your employer is actually giving you some bonus money above your salary (that is unless your super is rolled into your package. You can check this in your contract). Win!
There are a couple of types of super contributions
Like all things in life, there are different strokes for different folks. If you work as a regular employee, your pre-tax contributions will happen automatically and you don’t need to think about it — refer to our last point if you’re still hung up on this.
But there’s more to the superannuation pie. You can bolster your savings by asking your employer to flick a little bit extra from your pre-tax pay over to your super account (before-tax) or you can send money from your bank account to your super account (after-tax) as an ongoing payment or do a one-off deposit if you’re feeling generous one day.
There are also government co-contributions and tax offsets for low income-earners, plus even more options for couples, and contractors. Like we said, everyone’s different.
How much it’ll all be worth by retirement
Now for the money question. The amount your superannuation is worth by the time you retire at — let’s say for argument’s sake — 65, will be directly impacted by many factors. These might be how much money you’re pumping into it over the years, how long it sits in your super account for, how well your super fund invests your money, and the age you start pulling your cash out.
CareSuper has a detailed calculator you can use to figure out roughly how much your money will be worth in the future. Not only that, it is actually super helpful if you don’t understand how the pension, your super, and your age all impact one another, and explains it all in an impressive graph.
If you want to visualise your super in terms you actually understand, the CareSuper Spare Change Calculator is even better. It’s here I learned that if I give up one coffee per week, a single alcoholic bev per week, and add one measly additional dollar to my super (also every week), my super could be $1,008 richer after a year, and that’ll give me an extra $83 to play with every month in retirement. Superannuation is a long game, but with some clever money moves, you may have just turned $65 into $83. Now imagine the impact your monthly employer contributions are making.
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 725Image: Legendary Pictures