As a Millennial you have time on your side thanks to the power of compound interest.
Figures from The Association of Superannuation Funds of Australia's (ASFA) October 2017 report 'Superannuation account balances by age and gender' show many young Australians are not likely to have enough money for an independent life once their working life is over.
This means they'll need to rely on the government's age pension: the maximum weekly age pension payment for those eligible (including the maximum pension supplement and the energy supplement) is currently $532 a week for an individual and $802 for a couple.
Most people living on such a small income will need to seriously adjust their lifestyle to cope financially.
Check out the table below and see how your current super account balance compares to other Millennials.
The good news is that by taking action now, you can improve your super savings for the independent life you want post work. Being a Millennial means you have time on your side to do this. Even small changes made now can add up to a big difference by the time you reach retirement age.
Millennials are the first generation to receive the full benefits of the super guarantee (the compulsory amount your employer must pay towards your super), which is currently 11 per cent of your ordinary time earnings.
Millennials: How much super do you have compared to your peers?
According to ASFA's latest Retirement Standard, the super balances required for a comfortable retirement are:
- $545,000 for a single
- $640,000 for a couple.
These figures assume you already fully own your home and are in good health. And that you will receive a part age pension.
ASFA defines a comfortable retirement as one in which you can take domestic holidays and occasional overseas holidays, go to restaurants, enjoy a good range and quality of food, take part in a range of regular leisure activities, have top-level health insurance, own a car and replace your kitchen and bathroom over 20 years.
ASFA's Retirement Tracker can tell you whether you're on track for a comfortable or modest retirement.
How to get on top of your super
Small changes you make now can lead to a big difference in the next three to four decades, significantly boosting your balance by the time you can access your super.
Here are five ways to help you get there.
1. Work out how much super you'll have at retirement
There are several online calculators to estimate your super balance at retirement, including one for members of ANZ Smart Choice Super, winner of Money Magazine Best Value Super Fund for Young People Award 2020. Members can log in to ANZ Internet Banking and use the retirement calculator there. Additionally you can use MoneySmart's retirement planner. Once you understand the gap between what you'll currently have and what you'll need to retire comfortably, you can put a plan in place.
2. Make voluntary contributions
Any super contribution you make (in addition to your employer's mandatory 10 per cent per year) will benefit you in the long run – and it is concessionally taxed (subject to contribution limits). Consider adding a portion of your salary, or sacrificing part of your next pay rise or bonus into your super. With compound interest a 20-year-old who starts stashing away just over $6 a day could be a millionaire at 65.
3. Consolidate your super funds
If you have more than one super fund, consolidating them will save you fees and give you benefits from the investment earnings of a larger pool of money, while make it easier to keep track of your balance.
To consolidate all other super funds into your ANZ Smart Choice Super account, simply log in to ANZ Internet Banking and click on your ANZ Smart Choice Super account. With your consent, ANZ can search and find other super accounts in your name and Tax File Number. Select the accounts you want to consolidate, read the important information, read and accept the Terms and Conditions and click 'Transfer '.
If you don't see your other super accounts, email firstname.lastname@example.org and request a Super Match.
4. Check whether you're eligible for a government co-contribution
If you're a low or middle-income earner you could be eligible for a government co-contribution of up to $500 to help boost your super balance. There's also a super tax offset available to people who earn less than $37,000 a year.
5. Work as a team
If you have a spouse, they may put money into your super fund and receive a tax offset of up to $540 if you have little or no income. Check the Australian Taxation Office website to see if you're eligible.
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