Just a bit of super can make a bit difference

To often hear people complain about their super. That they have left it too late, that they’ve had some bad experience in the past concerning their super and worse still, that they have been ripped off by some ‘fly by nighter’, or by an outright scam.

While that’s always disappointing to hear, it doesn’t take away from the fact super is one of the best investments available to ordinary Australians. It is a relatively simple and tax effective way of providing for your retirement.

Typically, people respond by claiming they are too old or that they don’t earn enough but rarely is that a valid reason to ignore the benefits superannuation can provide for you as an investment.

Average full-time earnings in Australia are estimated to be about $97,510 a year and from July 1, of this year, this means you will be contributing 11.5 per cent to super or about $11,213 a year.

Using back of envelop numbers, if this is your employer contribution for ten years, you will have in excess of $110,000 in super by the end of that time and that is before including the earnings those savings will make along the way.

While a lot of people wrongly suggest that won’t make any difference to their retirement, I would argue it will make a huge difference. It will mean the difference between just getting by from one pension day to the next and having some spare cash in your pocket.

If you reach retirement age of 67 in Australia with $100,000 in super, you will qualify for the full age pension and in addition, you will be able to start your own private income stream from your superannuation to top up your pension entitlements.

Again, using back of envelop numbers, $100,000 can easily generate at least 6 per cent a year or income of $6,000 a year. That means an extra $500 a month in your pocket in addition to your age pension entitlements every year throughout your retirement.

If we also managed to get $100,000 into the superannuation account of your partner and do the same, that means you will have between you an extra $2,000 a month in addition to the age pension.

Suddenly your retirement starts to look a lot more enjoyable. Will you be travelling first class around the world on this level of income? No. But you will be able to do most of the things your average Australia looks forward to.

You will be able to grab the caravan and go travelling around Australia. You will be able to do something special on family birthdays or at Christmas. You will be able to enjoy your retirement in a way that otherwise might be out of reach.

And all you have to do now is concentrate and start making some sensible decisions regarding your superannuation.