We don’t let other people control any other big life decisions, so why let them decide the fate of our super?
When you’re in your 20s and 30s, it’s hard to imagine being retired, so super is something that often takes a back seat. After all, there are so many other things that seem more important, and frankly, more interesting.
At this age, life can be hectic. You’re probably working long hours, paying the mortgage and maybe even running the kids around, not to mention trying to fit in some fun. So there’s not a lot of time left to sit around and contemplate your super.
That said, there are lots of reasons why taking ownership of your super now will make retirement a whole lot more enjoyable when it does come around. Here are just some of them.
Increased life expectancy is both good and bad
Life expectancy is increasing all the time – the current average is 84 for women and 81 for men, which means some of us will live a whole lot longer than that.
While this is good news for you, it mightn’t be such good news for your super, and it’s the reason why “longevity risk” – the risk of outliving your retirement savings – has become such a big issue.
So if you’d rather be watching the sunset in Santorini than watching every cent, you might want to make sure your money will last as long you will.
You need more super than you think
To keep the good times coming when you finally do have the time to enjoy them, you’ll want enough super to fund the kind of lifestyle you have in mind.
And, don’t rely on the government to save you. The current age pension is only $658.70 per fortnight for a couple, so it’s more about surviving than thriving (especially with new reductions and restrictions coming in from time to time). While it can be wise to use the pension to supplement your retirement income, you don’t want it to be your only source of money.
Current thought is that you may need at least $590,000 for singles and $615,000 for couples to live off an income of $43,665 and $59,971 a year respectively, along with a part age pension (assuming investment returns in retirement of 5% a year).1 So say you’re in your 20s now, have $25,000 in super and are only adding around $5,000 every year, it could be time to step it up a gear.
The sooner you start, the better off you’ll be
As if being young doesn’t come with enough perks, it also gives you the precious gift of time. In terms of your super, that means you could have around 20 to 30 years to get into some good habits and watch your super snowball. Smart strategies to consider include:
Remember, no one cares more about your super than you
While we want to have control in so many other aspects of our lives, far too many people leave their super in their default super fund. While this might be a good option, the point is to be aware and engaged with your super so you can design your own future with the assets and choices you have. Over time, taking a bit of care and finessing your investments could make a big difference later.
After all, you wouldn’t let your employer be in control of your mortgage or any other major decisions, so why would you let them (or anyone else for that matter) decide what happens to your super?
At the end of the day, it’s your money – albeit money that you get to enjoy later. And by paying more attention to it now, there’s more chance that when you do enjoy it, you’ll be beside your chateau pool in the South of France!