Ok, so you're young and funky. And the idea of thinking about what you’ll be doing when you're 65 seems crazy. By the time that rolls around we might all be bowing down to a robot over-Lord or growing gills because global warming melted the ice caps. So why worry about it now. The word superannuation makes your eyes glaze over. And calling it super doesn’t make it much better. Super heroes maybe. Super cool for sure. But superannuation... BlahBlahBlah.
Still, can we at least agree on two things? Firstly money might not be everything but enough of it put a roof over your head. And something a bit better that instant noodles on the table. Secondly people are living longer and staying healthier. That means when you retire is a good chance that you’ll be fit and active. And looking to do all the things that work was getting in the way of. Snowboarding, paragliding, releasing an album and working your way through the entire back catalogue of Sudoku. And that’s what superannuation is really about. Planning for the party. Putting aside enough money so that when you retire you’ll be craving it up, not eating instant noodles. In fact this is so important that there is a range of legislation in place and legal requirements for employers to pay part of your earnings into your superannuation fund. Nine percent in fact, and this figure is growing. It is recommended that you seek professional assistance when making large financial decisions, esspecially those that can have a big impact on your future. Future Assist are a licensed financial Advisory service that can help steer you in the right direction.
Why is this important? Because of the wonder of compound returns. Ok so with employee contributions of 9% and compound returns over your lifetime. Let’s say you have a superannuation nest egg of a few hundred thousand dollars. But before you go thinking that sounds nice. We need you to imagine a puffa fish cross with a piranha, because now we need to talk about inflation and this inflation has teeth, sharp little ones and chew away your money. Remember how your grandparents always going on about how that when they were young they had bought a car and a house for $10. And still had enough change left over to pick up the latest phonogram player. And you parents may still recall being able buy stuff with one and two cents pieces. No more as time marches on, prices increase. Or inflate. So your money is worth less and less. So you keep you out of range of the terrible Puffa piranha fish. It becomes even more important to make sure your superannuation savings end up more like a cash elephant than a cash cow. Because we all know that piranhas can strip a cow in under two minutes.
There are three essential factors in aiming for the elephant. One, start early. As you saw our example the longer your savings are earning returns the more gravy you get. Especially in the latter years. Two, make additional contributions, the more you add as you go the more you'll harness the power of compound interest. Not only that in some circumstances the government might even help you out with the co contribution. Three, maximize your returns. When it comes to maximizing your return, it depends on what risky you comfortable with. There is no need to just accept the default option if you are young, you have a long way to go to even that investment ups and downs.
In most cases you have the choice of superannuation funds and also the kind of investment strategies that the superannuation fund will use with your money. You can also look into self-managed superannutaion (SMSF) . But higher rates of return are often more risky. Investment returns depend on a whole range of factors including the global economy, interest-rate, exchange rate and market confidence. The rate of return on riskier investments on any given day can jump around radically. And risk can be scary. Especially when you’re talking about money.
The above is provided as a general guide and should not be considered financial advice. Speak to a licensed financial adviser today about your situation, to see if your strategy lines up with your retirement goals and risk profile.
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