Tips for Young Achievers

The power of compund returns adds value for early additional Superannuation contributions.

Just by putting 5% of your salary into Super for the first 10 years before you settle down can save you a lot of worry 30 years later – let’s see how…..(see the assumptions at the end)

  • James contributes an additional 5% of salary (in addition to his standard 9%) to his Superannuation as a Salary Sacrifice for 10 years (age 23 – 33). Then stops and pays it into a mortgage.  At age 65 his Superannuation will be approximately $180,000 better off than he otherwise would have been.
     
  • John however does what most people do, and waits till he is 50, and then commences additional salary sacrifices at a higher rate ( of 11%) in addition to his standard 9%.
    He does this for 15 years (50 -65). At age 65 he will still fall short of James balance by $73,000, despite putting in twice as much for 50% longer than James.

In the above example we assume a Balanced fund returning 5.9% after tax & fees.
Also a flat unchanging salary of $45,000 over the life time, no inflation taken into account to demonstrate the principal. (James contribution is only $43.26 per week) 

Obviously inflation and changes to an individual’s income would muddy the comparison – but the point and the benefit outcome remains the same.

How wealthly would James be if he just dropped his salary sacrifice back after the first 10 years to 2% p.a. until age 55 and then increased it to say 10% for just the final 10 years ???

We have assumed a simple vanilla super fund – find out what I can do for you when it comes to better investment choices, tactical asset changes, investing with a currency hedge (or not).