(03) 9020 2905Bruce Brammall, The West Australian, 28 October, 2019
Sometimes, it helps to look at things backwards. Gives you a different perspective.
Today, that’s superannuation. Let’s look at super the “Benjamin Button” way. Start your super life at the end and work backwards.
Sadly, the average person’s view of super is: “Super can’t be trusted. Be thankful if super exists when you retire”.
That’s appalling, but understandable, given the constant negative news. So, come on a tour with Benjamin.
Super – 80s and 90s
“What super? It’s gone!” or “I never had any!” For the majority of this generation, it was spent ages ago.
To be fair, they never had much of it. The Superannuation Guarantee didn’t exist until the 90s, when this generation was largely through their workforce years. Don’t cry for them. They also didn’t have to pay capital gains tax on profits until the 80s.
The ones still with their wits about them are probably saying/whistling, (through false teeth): “Wish compulsory super started in the 60s when I started work”.
Super – 60s and 70s
“Bugger. Should have salary sacrificed more. Earlier.”
This generation is in their last few years of work or their first few out of it. They are wishing they’d taken superannuation more seriously, at a much younger age.
The retired are spending their super as slowly as possible, while maximising their government pension. They worked on their super in recent years, but they know (and regret) not starting earlier.
Those still working are more likely to be shovelling money into super, hopefully making full use of the $25,000 concessional contribution cap. A limited number will be also using some of the $100,000-a-year non-concessional contribution cap.
They’re crunching the numbers for retirement. And, dang it, understand too late the need to plough head-long into this. There are short-term tax savings to make now, but not as much time for investment growth.
Still, it’s tens of thousands for their retirement.
Super – 50s
The kids are off their hands, or nearly are. For two decades, they’ve been struggling with monster expenses, with their incomes only just keeping pace.
Your 50s is when most people “wake up” to super. Often in a cold sweat. Post-kids, retirement is staring at them, ominously. Their golden days aren’t looking as super as they’d once dreamed.
It’s not too late. But you MUST start now. Devote some serious attention. How can you get more money into super? Should you lift the risk profile of your super investments.
Super – 40s
“Super? Are you kidding? Have you tried to feed and clothe kids? Have you met my teenagers?! HAVE YOU SEEN MY MORTGAGE?”
I get it. Kids eat through your finances on two levels. On the surface, they are pigs, devouring everything. Below, they’re termites, doing financial damage you can’t yet see.
But if you don’t find time in your 40s to throw extra at super, you’re going to miss its major benefit – the compounding of low-tax money, earning at low-tax rates, for another 20 years.
Small sacrifices now are critical. Even $5000 a year (but preferably more). It could add a few extra hundred thousand dollars in retirement.
Super – 30s
“I’m just starting to earn real money. I need to live a little. Hey, what’s that stork doing out there in my cabbage patch?”
If Benjamin Button was really doing this, given his knowledge of ageing, this is when he would start working on his super. First, he’d ramp up the investment risk, then he’d start making extra contributions.
Yep, have some fun. But start to prioritise some for “later fun”. It doesn’t have to be huge. If you’re earning more than $50,000 a year, get a few thousand a year into super.
Add this to actions in your 40s and 50s and it will add several hundreds of thousands of dollars.
Super – 20s
“I’ve only just started to earn money! And you want me to hide it from me for 50 years?”
No, I don’t. Travel the world. Live in crappy share houses and blow everything on pizza, beer and Sunday pub sessions. Viva the Monday morning hangover!
If you can save some money, great. It’s a home deposit.
There you have it. Super the Benjamin Button way. And it’s not unreasonable, is it? It’s just about spreading small sacrifices over a longer period. Don’t leave it till its too late.
Bruce Brammall is the author of Mortgages Made Easy and is both a financial advisor and mortgage broker. E: bruce@brucebrammallfinancial.com.au.