Money and Life
(Financial Planning Association of Australia)
Whether youâve just started out in the workforce, or youâre getting ready to call it a day, itâs always a good time to start planning for life after work. Hereâs our decade by decade guide to getting your superannuation into shape, so you can enjoy a comfortable retirement.
With Aussies living longer than ever, you could be spending many happy years in retirement. But did you know that to maintain your standard of living, youâll need around two-thirds of your pre-retirement income, for the duration of your retirement? Thatâs a sizeable nest egg!
Itâs likely that superannuation will play a big role in funding your retirement lifestyle. So it makes sense to pay it some attention over the course of your working life.
Itâs never too early or too late to start taking an interest in your super. Hereâs what to focus on at each stage of life.
In your 20s
Many people join the workforce for real in their early 20s, making this a great time to get the super fundamentals in place. Here are the steps to take:
1. Choose a superannuation fund
At this age, there are many years ahead before youâre able to access your super (generally from age 65). Such a long investment timeline means you can consider taking on more risk, as your investments will have more time to recover from any market ups and downs.
Thereâs lots to consider when choosing a super fund, and the level of risk youâre happy to accept is one factor. Youâll also need to consider what the fees are, and perhaps youâd even like to know what your money is being invested in.
Read more: Superannuation 101 â Your guide to a happy retirement
2. Consolidating your super
If youâve worked several part time or casual jobs in your teens and early twenties, chance are you may already have more than one superannuation fund set up in your name.
Finding and consolidating all of your super into one account is fast and easy using the ATOâs online services. Simply login to your MyGov account, choose âATOâ from the service menu (youâll need to link it if you havenât already), and then, once on the ATO site, select âSuperâ.
3. Adding to your super
With so many years to go before you retire, itâs worth salary sacrificing a little extra, and adding any windfalls like a bonus or tax return, into your super. The power of compound interest means funds invested in your 20s will be worth much more by the time you retire.
In your 30s
This is the decade when youâll really start to see your superannuation take off. As your income rises, so too do your employer sponsored super contributions. This can work wonders for your super balance, especially if youâre able to salary sacrifice a little extra into your super each month.
Itâs a good time to conduct a super health check and review your strategy to make sure itâs working for you. Compare the performance of your super fund, and check whether youâre on track to having enough super to retire on.
You can compare the performance of your super fund with other top performing MySuper products using the YourSuper comparison tool on the ATO website. You might also like to review your investments with a financial advisor and put a financial plan in place.
Personal insurance becomes much more important at this age, as your responsibilities grow. Many of lifeâs major events happen in your 30s, such as marriage, children and buying your first home! Obtaining insurance through your superannuation fund can be a cost effective option. Speak to an insurance broker for advice on the right products and level of cover for you.
Read more: The superannuation health check
In your 40s
With retirement starting to feel more real, your 40s are a good time to focus on paying down debt and ensuring your super balance is on track. Look into how much super youâll need to retire and check whether youâre going to reach that figure. If not, consider making extra payments, and, review your investment strategy with a professional.
Your earnings are likely to peak sometime between 45 â 54 years, so youâll have more income than ever. However, this is often matched by higher expenses (think kids, schooling and a mortgage) as well as unexpected expenses, like health issues and even divorce. So aim to live within your means and put aside a little extra for retirement.
Remember, if youâve taken time out of the workforce to care for children or family, youâll need to be even more active with your superannuation once you return to work. The good news is you can make up the difference by salary sacrificing and making lump sum contributions to top up your super in later years.
Read more: Changing the mindset on your super
If you have any questions at all about preparing for retirement, it really is worth seeking advice from a professional. A Certified Financial PlannerŸ can review your investment strategy and help you develop a financial plan that will put you on track for a worry free retirement.