Are you Short of Super?

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If you are in your forties, you are already into the second half of your working life.  Sooner or later, you will ask yourself if you have enough money to retire.  The answer will probably be no.

According to ASFA, the mean average superannuation balance in the 2013-14 year for the 45-49 year age group was $119,500 (males) and $67,805 (females).  If you are in this age group, you’re in the first generation of workers who have been in the compulsory Superannuation Guarantee (SG) system for all the past 25 years since it started in 1992.  That’s the good news.  Now for the bad news.  You only have another 10-15 years before you are staring retirement in the face; and if your super isn’t a lot more than the averages above, you are seriously underfunded for retirement.

So here’s how the compulsory super system works.  Employers are currently required to put away 9.5% of your gross wages into a superannuation fund for your benefit.  So the first obvious point to note is that the system does not benefit everyone.  It only benefits employed people because the compulsory obligation only rests with employers.

So to make the most out of the system (i.e. maximise your savings by the time you reach retirement) you probably should be male.  I mean no disrespect to females but so many are clearly disadvantaged in the world of superannuation. Ideally, you need to be continuously employed on a full time basis for the entire 45 years of your working life on a very good salary.   It would also help to work the entire 45 years for an employer (e.g. certain sections of the public service) who contributes more into your super than just the minimum 9.5%.

Everybody else is at a distinct disadvantage and will worse off at retirement.  The system isn’t as kind to part time and casual workers, simply because they generally aren’t at work as much.  The system doesn’t place the same obligation on self-employed business people (i.e. who trade in their own name) to many tend to ignore it.  It most unkind to disabled, sick and injured people; and females raising children because they are largely absent from the workforce.

So if your superannuation is likely to be your only source of money saved in your name when you reach retirement then you have some work to do.  Although superannuation isn’t the only way to save for retirement, it is the most tax effective way.  If you are over 60, legally retired, and in so-called pension phase by drawing an income stream from your superannuation, you should be in a completely tax-free environment.  That is why people in the know try so hard to get as much money as possible into their super prior to retirement, and why the government tries ever harder to restrict them.

So the first step is to start with these 5 home truths:

  • Your super is actually your money; it is just not available to you at the moment
  • To retire on super alone, you will probably need an amount as much as, if not more than the value of your house
  • You do have control, so you can add to it, make changes to it or even change funds
  • Your employer is only obliged to deduct super for you and put it somewhere, that’s all
  • It is your money so it is YOU who is expected to MANAGE it

Ten to fifteen years is enough time to make a significant difference to your super but you should act now.  Now that you have a reason to hurl yourself into action, call me and I will show you how to give your super a 6-Part Makeover.

Cheers

Gary