A stitch in time couldsave you $1,000s whenit comes to super
Sally Tindall, Money Editor, RateCity.com.au discusses how even small regular super contributions can add up to a more secure

Are you prepared for the future?
For many Australians, life in retirement is set to be a lot tougher than they think.

That’s because while most people expect to have enough funds to finance their post-work dreams, in reality the average Australian is currently retiring with a super balance of just $207,9501, according to 2015 Roy Morgan research.

That equates to just $28 a day over a 20-year retirement –barely enough to cover the essentials of life like food, clothes ,transport and a small bar heater in winter. So why are so many of us falling short when it comes toretirement planning?

Perhaps one of the main problems is our “she’ll be right” mentality. A recent RateCity and SuperRatings survey2 shows that just one in five people are worried about not having enough super. This means the remaining 4 out of 5 people either have enough in their super account to lead the retirement they want, or they’ve just assumed that holding down a steady job for the better part of their working life should suffice. It’s this mentality that needs to be challenged.

The truth is we’re all feeling the pinch these days, including the government, so you can’t be sure that the pension will always be there as a plan B.

Making additional concessional [pre-tax] contributions into your superannuation is one of the best ways to fund a potential shortfall and the best time to start is in your early twenties. A large part of this rationale is based on the power of compounding interest – the longer you invest your money, the more you’ll make. But there’s also another key reason: it’s far easier to find spare change on a disposable income than it is when you’ve got a handful of dependents and a mortgage to pay. As soon as these two factors set in, you could be strapped for cash for the next couple of decades.

It all adds up
The process for making extra super contributions is relatively straightforward and keep in mind, you don’t have to lock up big amounts to get a noticeable financial boost in retirement. Indeed, it’s the small weekly sacrifices that will make all the difference by the time you reach the end of your working life. Before you decide to invest more in your superannuation, you should consider the contribution caps that apply to different contribution types and the penalties that may be payable if you exceed the applicable cap.

Based on a 30-year-old earning $80,000 who is planning on retiring at 65, one fewer coffee a week, at a cost of $4, could translate into more than $12,000 extra in retirement. Better still, the simple act of taking a packed lunch to work one day a week, saving an estimated $15 and contributing it to super, could add over $46,000 to your super balance over 35 years. Add to that a few more of life’s luxuries that you’re willing to forego occasionally and your extra contributions could start doubling, or even tripling.3

Once you’ve decided to make extra contributions, stay on track by keeping an eye on your super balance. RateCity research4 shows that almost 50% of people don’t actually know how much they have in their superannuation. Based on this, it’s perhaps no surprise that so many Australians are only working out that they’ve fallen dramatically short when they’re just about to retire.

It’s also important to remember that superannuation is a complex product and what works for one person may not be right for another. Seek professional advice on the best way to maximise your contributions as an expert will be able to give you an idea of government schemes or tax benefits that may be able to assist.

1 Roy Morgan Single Source Superannuation survey, Nov 2015
2 RateCity/SuperRatings superannuation survey, Feb 2016
3 http://www.ratecity.com.au/infographics/news/superannuation-would-youhappy-
4 RateCity/SuperRatings superannuation survey, Feb 2016
This article has been prepared by RateCity Pty Limited ABN 12 122 743 524
AFSL 316710. The information is current as at 02/08/2016 and may change.

General Advice Warning: Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

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