Turning 30 is a milestone that strikes trepidation into the hearts of many, but in terms of superannuation it’s the ideal time to start getting ahead.
After a few years in the workplace, your super should start looking like a sizeable lump of cash; most funds say this the age when most people begin considering it as “real money”.
Retirement may still feel like a long way away – but the earlier you start preparing, the bigger your nest-egg will grow.
Here are seven tips to increase your savings for life after the workforce, and how to get the best out of your super fund.
Cover the basics
By the time you hit your 30s, you should already have your super into order. This means consolidating your accounts and making sure you’ve picked a super fund that works for you. If you haven’t, you could be missing out on thousands of dollars. The Rate my Super tool is useful to compare funds over the long-term.
This also means having your overall finances sorted in terms of paying down bad debt, such as credit cards.
Bump up contributions
This is the decade when many people buy their first home, get married and have kids, so putting away extra cash may seem like a big ask. But even though sneaking an extra $20 a week into your super might seem difficult – if not impossible – when you have so many other financial commitments, there’s good reason to make the effort.
Julie Lander, CEO of Care Super, says that early investment will take the pressure off in your 40s and 50s, thanks to compound interest.
It also provides tax benefits through salary sacrifice, she adds.
“It can be as simple as putting one salary increase into super – you won’t notice it now, but in the future it could make all the difference,” Ms Lander told The New Daily.
If you want a targeted approach, you can use the ASIC MoneySmart’s retirement income calculator to get an idea of how much money you’ll need to fund life you want.
Go for growth
This is the time to be aggressive about your super.
You’re young enough to park your money into high-risk investments that offer a high return – such as the share market – because if there’s a big correction you have enough time left in the workforce to recoup your losses.
Rebekah Wilson, marketing manager at REI Super, says that super funds will generally put your funds into a default account – usually a safe, balanced option – unless you specify otherwise.
“If I was going to by a house to sell in five years’ time, I’d be taking a very different approach to buying a house that I was going to sell in 30 years,” Ms Wilson told The New Daily.
“Super is the same. You can do a risk profile quiz, you can find out what you are in, but you should talk to your fund about a more aggressive option, because if anyone can consider it if you are in your 30s it a good idea.”
She warns that staying in a balanced account can slow your growth.
“They aren’t disadvantaged but they are literally driving in second gear,” she said.
Care Super’s Ms Lander says it’s important, though, to understand the relationship between risk and return.
“Some options may historically lead to a higher return over the long term, but if you put your money in them you have to be prepared to ride out the highs and lows,” she said.
Stepping free of the invincibility of your 20s, you will likely now have debts such as a mortgage and a lifestyle that depends on a stable income.
Ms Wilson says members in their early 30s begin to show an interest in the other benefits of super such as life insurance and income protection.
“We have a member, for example, who was drinking and fell over by the pool in Bali and broke her coccyx bone and came back to Australia under travel insurance, but if you’ve cracked your tailbone, you can’t drive, or sit.
“When she came back [to Australia], she’d used her holiday leave, she couldn’t drive, she couldn’t work, but she had salary protection.”
Super funds also offer free financial advice, which they encourage you to take advantage of.
Ride the wave
If you’re contributing a bit extra to your funds and have put your investment into a high-growth option, the next thing to remember is not to panic.
REI Super’s Ms Wilson warns that some of the people that jumped to cash or conservative funds during the GFC forgot, or were too scared, to change back once the worst was over and missed their opportunity to re-build their funds.
Care Super’s Ms Lander says to think of your fund as like the equity in your home.
“It’s not money in your pocket right now, but it’s helping to set you up financially and give you more assets to draw upon in the future,” she said.
Cover the baby gap
Regardless of if they’re in your 20s, 30s or 40s, women taking time out of the workforce to start a family need to pay mind to their super.
REI Super’s Ms Wilson says that women should investigate options to keep their super topped up.
This could include spousal contributions to their fund while they’re on maternity leave or bumping up their individual contributions before their career break.
“The impact of being a woman and having super in retirement is thousands [lost], so in your 30s is when you have to put up the weight to counteract that,” she says.