The easiest way to save your super is to treat your super like you would money in the bank – which it is, nearly, except that you can’t spend it yet.
Key message: It’s your money
You turn up for work and your employer must pay money into a super fund on your behalf – the equivalent of 9.5% of your wages or salary every year, and these payments must be made at least quarterly (every 3 months).
Even if you do nothing in relation to looking after your super account, your employer’s compulsory contributions (known as Superannuation Guarantee) can add up to thousands of dollars. For more information on Superannuation Guarantee contributions, see SuperGuide article, Superannuation and employees: 10 facts about your super entitlements.
You may even think about putting in super contributions yourself.
How it works:
Alice is 28 and earns $55,000 a year plus super. Each quarter her employer contributes 9.5% Superannuation Guarantee which works out to be $5,225 a year. After five years, Alice could have $21,000* in today’s dollars in her super account after taking into account earnings on those contributions, allowing for $300 a year on life insurance, and after deducting fees and taxes and insurance premiums. After 10 years, Alice could have just under $51,000 in today’s dollars sitting in her super account, allowing for $300 a year insurance, and after fees and taxes. Today’s dollars mean that the $51,000 is after adjusting the amount each year for 3% inflation. In tomorrow’s dollars (rather than today’s dollars), after 10 years, Alice could have just under $59,000.
That’s a lot of money for doing nothing!
*Assume annual return of 7% after fees and taxes. Assume Alice has life insurance premiums deducted of $300 each year. The super balances are in today’s dollars (adjusted downwards to account for future inflation of 3% a year). Figures calculated using ASIC’s superannuation calculator, www.moneysmart.gov.au.
For more super tips for beginners, see the following SuperGuide articles:
- Super Tip No 1: Treat your super like overtime
- Super Tip No 3: Turn $1000 into $1500 in three steps
- Super Tip No 4: Understand what happens to your super money
For more information on the super basics, see the following SuperGuide articles:
- Super for beginners, part 5: Is super my money, or the Government’s money?
- Super for beginners: Top 10 must-know facts
- Super health check for beginners: 10 tips for your 2018/2019 retirement planning
- How to compare super funds in 7 easy steps
- Super for beginners, part 2: Casual work or starting first job
- Super for beginners, part 21: You know where your super goes, right?
- Help! Where did my employer pay my super (SG) contributions?