Firstly... Congrats! Now, I’m going to start with two things that directly contradict each other (good start!).

It’s amazing that you are having conversations with your friends about money and Superannuation more specifically! Yes, we do want to boost that baby up so you have options and security in retirement but... we also need to remember we are all on our own journey and comparing can be helpful to benchmark but it can also be stressful and lead to emotions of guilt, shame and fear, which are ultimately unhelpful as you’re trying to build wealth and be secure!

Many of us are always looking sideways, but the best thing you can do is look forward for you. Your years at Uni may have now given you significantly more job and income opportunities to build wealth (and your Super balance).

I wish everyone in their 20s was thinking about what tiny little tweaks they could do now to their Super, like looking at how growth weighted it is (the general rule of thumb is the longer you have till retirement, the more time you have to ride out market volatility)? How much you are being charged in fees? Could you do additional contributions? Even small ones that you think won’t make any impact do, promise. You could see tens, if not hundreds of thousands of dollars more at retirement stage. I’m loathed to say miss a latte every now and then it will make you financially secure, it's not a silver bullet, but it truly does make a difference.

There are two types: concessional (before-tax) and non-concessional (after-tax) contributions. Each of these have different annual limits and tax considerations.

What options do you have:

*Salary Sacrifice: You could consider setting up a salary sacrifice arrangement with your employer once you enter the workforce. This means you agree to have a portion of your pre-tax salary contributed directly to your super fund. By doing this, you reduce your taxable income and boost your super balance at the same time... You don’t have to put a set amount in, I normally say to young people put in what you won’t miss and increase as your budget and life allows (but, don’t like, forget about increasing it as and when you can). My friends at MoneySmart* have made this calculator that could be handy (*not sponsored - but honestly, given I promote their great work so much, maybe I should be. Jokes.).

*Contribute Extra from your savings: This assumes you have extra cash you want to chuck in and keep there until retirement age. If you do this, call your Super Fund to see how you can claim it as a tax deduction (assuming it’s a concessional contribution). Generally, they have a specific form that must be received by them before the financial year ends.

Also, if you are planning on doing this and then changing your super fund, make sure you speak to them. The last thing you want is to make, what you think is a deductible contribution, only to find out you can’t claim it.

There are also ways to backfill for years when you didn’t reach your annual cap (currently $27,500per year), there are some specific requirements for this, so check first to make sure you’re eligible. Generally, your balance needs to be under $500k (which yours is!) and you can only use the bring forward rule for 5 years.

*Government Co-contributions: If you earn below a certain income threshold, you may be eligible for government co-contributions. The government can match your personal after-tax contributions up to a certain limit, which can significantly boost your super savings. Worth investigating!

*Spouse Contributions: If you earn less than $40,000 per year, your partner may be eligible for a tax offset if they make contributions to their super account.

On that, for gods sake, if you go on parental leave, with no Super being paid *PLEASE* discuss Super splitting for the non-income producing spouse (which statistically, is likely to be the mother in a hetero relationship).

This time not getting Super contributed can have a significant impact on your overall balance. Also, can we please start a rally so the Government will pay Super on their Paid Parental Leave benefits?! It truly blows my mind they don’t do this.

*Consolidate Super Accounts: Do you have multiple super accounts? If so, why? There may be a perfectly good reason (I.e. Insurance you can’t get elsewhere you need to keep – Make sure you apply to keep this in force, otherwise it might get cancelled if your balance goes under a certain threshold or you don’t make contributions after 16 months). If not, you might be charged multiple fees.

Ideally, you want a low-fee, high-performing net performance fund (look for the longest time horizon possible on past performance, remembering it’s never a guarantee), with the right level of risk for your life stage, that is aligned with your ethics. I know that’s a mouthful, I did a two-part podcast on this with the lovely Kate from Rask that you can find here if you want to dive deeper.

So, it's never too early (or late) to get onto this! No doubt you have a long and successful career ahead of you, making some of these savvy moves will give you every chance of having a healthy super balance by retirement age. And we all want a life where our money outlives us, not the other way round!

Jess

Have a money dilemma?

Money dilemmas can be a nightmare! They can leave you up all night ruminating about what to do, have you feeling alone and isolated or just plain ol' stuck. So, we are here to help. I am going to tackle one a week and give you my unbiased, no BS general thoughts on how to tackle your conundrum. We would love for you to send yours (or someone you know) in. 

Obvs all of this is general advice only... especially important to note any and all of the comments above do not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs.