I’ve hit the ripe old age of 21, the coming of age year, and my future is before me.
I’ve got my career under way having graduated from university with a wonderful HELP debt that at this stage is going to take me more years to pay off than it took to gain the degree. In fact I may be lucky to have it paid off by the time I’m 30.
I’ve just found out, in order to retire I’m going to need at least $1m saved up, just for myself, let alone my spouse, if I want to live comfortably, and that’s more than 40 years away because by the time I’m ready to retire, they may have changed the age when I can access my super. And add to this as a female, I may lose a few years when I want to spend time raising a family.
How are these new super changes really going to affect me, because I don’t think I’ll ever get to $1.6m!!!
Claiming superannuation as a tax deduction didn’t get harder but the limit you can claim did get reduced, so in turn, your end balance may be affected.
Most young people are not thinking of saving for super simply because it is too far away for them to even contemplate what kind of lifestyle they may want to enjoy in retirement. Heck, they don’t even know what kind of lifestyle they want next month.
So encouraging a young person to even start thinking about super can seem impossible, but should still be attempted nevertheless. And as part of an older wiser demographic, as a parent, we can all start by talking with our kids about how important super actually is for them and their future.
Every employee starting to work from the age of 18 should be benefiting from the compulsory superannuation contributions their employer will make for them. Even on a starting salary of say $45000 this would generate a first year amount of $4275. Yes taxes are taken out, but with earnings and accumulation of these monies being invested each year, and hopefully a pay-rise each year, this will start to grow quicker than we think.
The average wage has now reached up into the $70k bracket. The mining boom and the city incomes certainly impact this average, so what industry you go into for your career will be what impacts your ability to save for your retirement. Your own lifestyle and personal needs such as family and housing will impact your available cash to either boost or stagnate your super balance.
So what incentives are there to start saving young and how would you go about it?
Most of us want to live the great Australian dream and own our own home. But getting into this market is getting harder and harder each year. So my question is, have we got it round the right way when we focus on the home now, and leave our future to dwindle at the end, hoping to find a magic pot at the end of the rainbow.
What if the strategy is to save for the future retirement now as quickly and as aggressive as we can, so that when retirement arrives, we actually have the cash to either acquire the dream outright, or really live the lifestyle we so desire. Can we have it both effectively? Or are we better off focusing on the one that may give us a bigger bang for our buck in the long run.
For those of us who bought into the dream of owning a home, we may be too far down the lane to make a detour and realign our thinking into something better. But what if there is an opportunity to stop and look down the road of plenty and find a way to create more wealth before it’s too late?
Well there always is that chance, we just need to pull on the brakes and ask for the right directions. Getting lost in a new area is one thing, but getting lost in a financial area could be disastrous. A financial GPS is what we all need from time to time, and that comes from a great financial planner who can navigate the way down all the super rules, and the best way to invest.
And no, we are never too young to ask for help. We just have to ask and we just have to start.
If I was 21 again, I’d say to my 21 year old self “you know, saving now and not buying that desert could assist in more ways than one, but you must put it somewhere safe, like your superfund account”. I can’t complain really as I was a saver and did manage to buy that first home at age 28. But with my wonderfully clear hindsight glasses on, I do wish I’d sacrificed more into super across each year. The biggest regret was being self-employed for so many years and not putting super aside in each of those years. Something that I see clients do all too often.
So don’t take it for granted that there will be a magic pot at the end if you don’t start now.
The reduction in the limits of contributing may never impact you and the upper limits you may never reach, but super is what you will need to put food on the table when you’re retirement party begins. And the house you worked so hard for and paid off, doesn’t have a hole in the wall you can withdraw from to cash in your bricks to buy the baked beans you may have to eat for dinner.