With retirement a long way off, it’s easy to think that super is something you can leave for later. But a few simple steps now could boost your super savings by thousands.

When you’re young and single, it’s tempting to focus on the here and now, leaving the long term stuff like super for later. But there are lots of good reasons why you should invest a little time – and a little money – in super while you’re still young. For example:

  • It’s your money. For every $11 you earn, your employer pays around one-dollar into your super, so it’s important to make sure it’s working as hard as possible.
  • Super guarantee is not enough. The sad truth is that your employer super guarantee payments, currently equal to 9% of your salary, are unlikely to be enough for you to maintain the lifestyle you want when you eventually stop work.
  • For example, a 25-year old man earning $45,000 a year might potentially end up with super savings of just $361,125 at age 65 – enough to fund an estimated retirement income of just $29,010 a year in today’s dollars. And it can be even harder for women to save enough for retirement – both because they are likely to live longer (which means they need to save more) and because they’re likely to take time off to have kids (which means they have less chance to save).
  • The sooner you start, the more you’ll save. Just a little extra invested now can make a massive difference over time, because you have decades to earn returns on your returns. If the 25-year-old in the example above were to put in $100 a month of his pre-tax salary into super, he could potentially boost his savings by more than $96,000 by the time he turns 65. But if he waited until he was 35, he might only save an extra $57,185, almost $40,000 less.1

So if you’re ready to take control of your financial future, here are five easy steps to get you started.

Step 1. Get it together

If you’ve already worked a few different jobs, you probably have more than one super account. By putting them together in a single fund you can save on fees and get your money working harder. Find out how in Easy ways to strengthen your super.

Step 2. Check out the options

Your super fund probably offers a choice of investment options – some more conservative, others higher growth. High growth options typically invest more of your money in shares and property, which have historically produced higher returns over time, but with more ups and downs along the way. Because you have time on your side, you may be able to ride out those peaks and troughs, potentially enjoying higher growth than someone with a more defensive outlook and less time to retirement.

Just a little extra growth can make a huge difference over time. If the 25-year-old in our example was able to get a return just 1% a year higher than the 7% from his current fund, he could have an extra $103,147 by the time he is 65 – enough to lift his estimated retirement income by more than $10,000 a year.2

Remember, a higher growth strategy comes with greater risk, so it’s important to discuss your investment strategy with your financial adviser before making any investment decisions.

Step 3. Set a target

Before you can get on track to reach your target, you have to know what that target is. Use our
How much super is enough? calculator to provide an estimate of how much you need to save each month to get a retirement lifestyle worth looking forward to.

Step 4. Give your super a boost

Chances are you’ll need to save more than just your super guarantee payments. There are two good options here, depending on how much you make:

  • If you’re on a lower salary, you may be eligible for the government co-contribution if you make a contribution from your after-tax salary.
  • If you earn more, you may do better with something called salary sacrifice, allowing you to effectively contribute from your pre-tax income.

A financial adviser can help you decide on the best option for you, then get you started.

Step 5. Stay on track

Super is for the long term, but that doesn’t mean you should set and forget. It’s important to take stock every now and then. Especially at important moments like getting married, buying a house or having a child.

If in doubt, talk to a financial adviser. Because it’s your future that’s at stake – and none of us are going to be young forever.

  1. Based on a 25-year old male earning $45,000 with $8,000 in super, receiving 9% super guarantee contributions for 40 years until retiring at age 65, with an investment return of 7% pa, inflation of 3% pa and salary increases equal to inflation. This example is for illustrative purposes only and returns are not guaranteed in any way. For more information and further important assumptions about how this example has been calculated, please visit our
    How much super is enough? calculator.
  2. Based on a 25-year old male earning $45,000 with $8,000 in super, receiving 9% super guarantee contributions for 40 years until retiring at age 65, with an investment return of 8% pa, inflation of 3% pa and salary increases equal to inflation. This example is for illustrative purposes only and returns are not guaranteed in any way. For more information and further important assumptions about how this example has been calculated, please visit our
    How much super is enough? calculator.

Disclaimer

Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. PDSs for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on number 13 13 36.

This document is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to provide specific advice.

Copyright © 2012 Colonial First State Group Limited.

All rights reserved.

This was orignally posted on The Wealth Generation Investor resource site.