Over 30? Get Your Head Out of The Super Sand

Mar 05, 2018

If you are 30 today you have 35 years left in the workforce and need to save enough to fund at least 35 years in retirement. If you are older than 30 then the news gets worse… This is a confronting but true reality.

Why bother with your superannuation in your 30’s or even 40’s?

Far too often as a financial adviser I hear clients say, “right now I have too many other things to worry about, I have a big mortgage, have to fund kids education costs and I am just trying to keep my financial head above water and I will worry about my retirement later.”

The average Australian couple today needs $60,000 per annum in retirement to live comfortably. Remember this is the average and it certainly doesn’t mean that they are spending $60,000 per annum, as this includes costs such as home maintenance, the need to replace cars and a modest holiday.

For a 65-year-old today, with a balanced portfolio, they will need $1,050,000 to retire if they want their money to last 35 years. That seems like a long time to provide for in retirement considering the median age at death is currently 82. However, with improvements in medicine, the median age at death is increasing at a rate of 0.6 years with every year that goes by. So by the time today’s 65 year old reaches their mid 80’s the median could easily be 94. On top of this is the consideration that this is just the median, with 50% of people living beyond this statistical number.

So if you are in your 30’s or 40’s today the likelihood of needing to plan to fund your retirement till at least the age of 100, is certainly not out of the question. However, by the time the 30-year-old turns 65 they will need a much larger nest egg of $3,000,000 to achieve the same comfortable lifestyle.

So to be financially on track at the age of 30, assuming $10,000 per annum of combined super contributions you need to have investments outside of your home of at least $120,000. If you plan on upgrading your home you will need even more. The table below shows how a 30-year-old today would need to track financially over the next three decades:

  Net assets outside the home required
Age of 30 $120,000
When they turn 35 $220,000
When they turn 40 $370,000
When they turn 45 $590,000
When they turn 50 $900,000
When they turn 55 $1,360,000
When they turn 60 $2,100,000
At retirement age 65 $3,000,000

 How to get on track?

1. Review your superannuation fund

It is not just about fees, you need to carefully look at the investment returns after fees are paid. Also be careful about hidden traps such as taxation being taken out of your account before payment needs to be made to the tax office. Many super funds are guilty of this last one and this can equate to tens of thousands in lost investment returns over the years. If you are unsure it is well worth seeking professional advice as an adviser I spend hundreds of hours every year researching and assessing the complex world of superannuation.

2. Consider making extra contributions

There are strict limits on how much and what ways you can contribute to super, know the rules and where you can afford to consider making extra contributions.

3. Build up non-superannuation investments

With such tight limits in place, you may need to build up investments outside of the superannuation system. However, have a long-term plan on how to get these investments liquidated and transferred into super to reduce your tax in retirement.

4. Consider Gearing

Borrowing to invest is not suitable for all investors as it does increase your risk. However if suitable, remember borrowing to invest can be done both inside and outside of super into a range of investments including property, managed funds and shares.

5. Seek the Right Advice

Money doesn’t make the world go around but it does make it easier to enjoy. Seek professional financial advice, and start a conversation about your financial future.



Source: ABS Deaths, Australia (cat. no. 3302.0).

Inflation at 3% p.a.

Balanced portfolio 7% p.a. return

Funds invested in superannuation

Superannuation Contributions increase at rate of 3% p.a.


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