Over the past few weeks, I have had some startling conversations with some of my friends regarding their super.
They’re all in their early 20s, and half of them do not know who their super fund is or have no idea how to log in to their super. The other half are aware of how to do this but have not bothered to check up on their super because, “I’m not even 25, I won’t be touching that money any time soon so what’s the point in worrying about it?”
Granted, your early 20s may be a bit soon to begin salary sacrificing – though, that is a fantastic idea if you can afford it. It is very important to consider the impact that a couple of decisions early in your life can have on your super balance come retirement.
The easiest thing to do is to login to your super and check out what investment option you’ve been allocated to. Why? Because for most super funds the default investment option is a ‘balanced’ allocation. Generally this means that 60-70% of your funds will be allocated to shares and property while the rest will be in fixed interest and cash.
While you should ensure that your super is invested in line with a level of risk that you are comfortable with, as someone in their early 20s who won’t be seeing their super funds for at least 40 years, I am a ‘growth’ investor. A growth allocation typically invests 70-80% of your funds into shares and property.
To illustrate why this difference can be so important to your super balance come retirement, I have used the superannuation calculator on ASIC’s Moneysmart website (a fantastic resource for financial guidance).
Below you’ll find a comparison of super balances invested in balanced verses growth allocations. I’ve used the average Australian salary ($61,932) as a basis, set the age at 25 years old, and set the super balance at $15,000 relying solely upon Super Guarantee Contributions.
As you can see, there is a $21,646 difference between the balanced and high growth option. This is because over the 40 year time frame, the risk associated with the larger allocation of risky assets (shares) in the high growth option, is slightly higher and has therefore generated a higher return on investment as a result. This ASIC calculator uses a 4.8% p.a growth on investment under the ‘balanced’ allocation, and a 5.2% p.a growth on investment under the ‘high growth’ allocation to reflect the difference in risk levels.
Obviously these figures are only a guide but the point is it pays to give your super the attention it deserves. Your future self with thank you for it!
If you’re ready to get serious about your super, why not speak to an expert? The team here at The Hopkins Group are across all things finance and are here not only to help you understand all things super, but also help you on the way to achieving some of your other life goals as well. Remember that things take time, so the longer you have your super working for you, the greater the potential result.
General Advice Warning: This blog may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. It is important that you consider your own situation before acting on any information contained in this blog. Please seek personal financial advice prior to acting on this information.
Disclaimer: Josh Keplac authored this blog with guidance from Michelle Kelada. Michelle Kelada is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.
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