FOR anyone in their 30s who can afford to put money into their superannuation, now is the time to start.
Even just salary sacrificing $50 to $100 a week can have a significant impact on your retirement if you start now, according to Bond University professor Keitha Dunstan.
While she said there was no “magic formula” she said those in their 30s who earnt six figures needed to act now to shore up a comfortable future.
The accounting expert gives an example of a 35-year-old earning $100,000 who gets a $5000 pay rise each year.
If that person put that $5000 a year into their super, they could increase their balance by 37 per cent.
Simply holding onto it and relying on the superannuation guarantee of 9.5 per cent would only result in $600 a year.
“If they salary sacrifice the entire amount, it makes a big impact,” she said.
“If it’s a pay rise, you haven’t put it in your pocket before, so you’re less likely to notice it.
“It’s a way to put away for your future without making you feel like you’re losing too much now.
“It doesn’t matter how small it is, even if you only put that $5000 in once, it’s impact is ultimately more than $5000.”
Prof Dunstsan said ultimately people saved because there was a lower tax rate for super.
The maximum tax rate for contributions up to $25,000 is 15 per cent.
The qualified accountant said, in an ideal world, a person earning $100,000 whose employer was contributing $9500, would top up their contributions by $15,500 to meet the $25,000 threshold.
“It’s a way of saving tax but obviously you need to afford doing without that money,” she said.
But Prof Dunstsan said no one could rely on super alone; owning a home or an asset is also needed to retire comfortably.
“Increasingly, young people aren’t buying their own homes, so it does mean that if you aren’t buying your own home, it is important for young people to say: What other assets am I going to own by 67?” she said.
That means someone taking out a 30-year mortgage should aim to buy a property by the time they turn 37.
If at 37 you do not go down that path and simply rely on your 9.5 per cent super, you will not have enough to retire at 67, Prof Dunstan says. You would need to have other investments in the order of $1 million.
Prof Dunstan, who recently shared her advice at a Women in Media conference on the Gold Coast, said her top tips were to get rid of credit cards or at least their balances.
She said if someone was in too much credit card debt, they were better off taking out a personal loan to pay it off because they had lower interest rates.
Prof Dunstsan said people saving for a house should take advantage of the government’s First Home Super Saver Scheme, first home buyers could add up to $30,000 into their super fund and draw it out for a home deposit.
She recommended salary sacrificing extra funds, rather than putting them into offset home loan accounts, which have higher interest rates right now.
“Saving in a mortgage offset is much better than just saving these days,” she said.
Prof Dunstsan advised that people should have 20 per cent of their salary in savings.
She said people on good money in their 30s really needed to take action.
“You’ve got the opportunity to really give yourself a good plan. It’s the difference between modest and comfortable,” she said.
“People who earn less than $100,000 possibly can’t aspire to that.
“If you’re on a good income and waste it away, that’s when you’re going to have regrets when you’re older. They’re the people who have got the opportunity to change their means.”