Tweet

The XYZ of Adequate Returns in Super

Guest post by: Rob Bourne

Article Overview: The younger generation have the opportunity to create a substantial sum for retirement if they use this special ingredient wisely

The XYZ of Adequate Returns in Super

If you're a late entry X gen or better still a Y gen just entering the work force then it's likely you have more than 40 years to retirement. And that means you have something that the baby boomers don't have - time.

According to the Association of Superannuation Funds in Australia the definition of an 'adequate' retirement income will have you living on a figure of around $26,000 p.a.

Hmm, there goes that overseas holiday.

Time is what could make the difference between having an 'adequate' retirement which is pre-determined by your lack of action or a retirement where you get to choose the lifestyle that monetary assets can provide.

Superannuation is regarded as one of the best investment vehicles for retirement savings. Besides the tax savings, it provides the opportunity for young people to create substantial balances that are just not possible for the older generation of baby boomers.

If you are looking for more than adequate returns from super then you need to act now.

The power of compound interest or earning interest on interest needs a vital ingredient - and that is time. You can't control the time you've been given but you can control how you use it.

Let's look at 2 examples.

Example 1

You are 18 and decide to put away $1000 a year (less than $3 a day) until you are 30. You make no further contributions until your retirement at 65. That's only 12 years and a total of $12,000 you have saved. Let's assume you received an average return of 8%p.a. on your investment after all fees and taxes.

Example 2

You are 50 and decide to put away $5,000 a year (nearly $14 a day) until your retirement at age 65. You have no other superannuation. That's a total of 15 years and an impressive $75,000 you have saved. Let's also assume you have received the same average rate of return at 8% p.a. after fees and taxes.

Which is the better strategy?

Example 1 or starting at 18 will give you a balance of $343,241 at retirement. Not a bad return for an investment of $12,000.

Example 2 or starting at 50 will give you a balance of $163,751 at retirement and you've put in $75,000 of your own money.

That's the power of compound interest and why time is so important. The more time you have to invest the longer you have for compound interest to do its magic.

To make compounding even better for your super you should also look to consolidate your super into one account. It's not unusual if you have moved around between several places of employment to end up with multiple super accounts. By consolidating these accounts you will save on duplicate admin fees and the compound effect of this can be substantial.

If you're an Australian and earn under $32,000 a year you may also qualify for the government super co-contribution which adds another $1,000 a year, each year you contribute. If you added that to our 1^st example you would end up with a balance of $686,481 at retirement. Not bad for an investment of only $12,000.

The message here is clear. If you are an X or Y gen then you have the power through time to choose the retirement lifestyle you want. The longer you delay the closer you will end up with only adequate returns from super.

Related Articles
  How Can I Grow My Super?
  Do You Promote from Within?
  Time for Apple to release a 25th anniversary Mac
  Entrepreneurs: The New Superheroes
  When Entrepreneurs are Outstanding

Article Tags: retirement, x gen, y gen, younger generation
Referred by: http://jaykubassek.com



Related Forum Posts
Re: Super Mario Dethroned - You people are crazy. Super Mario will NEVER be dethroned! Vive la Mario & Luigi! I'm sorry, but remembering those days playing Super Maria for Nintendo and wondering when I would finally hit the last level and be able to beat the evil dragon for my perfect princess will never die. Wii is fantastic, but I'd still prefer the rights to Mario - if even for sentimental value.
Re: What I enjoyed reading this week - Jan 13, 2012 - Thanks Evan, I found the "Law of Diminishing Returns" article very interesting and I agree that it makes perfect sense. When one sits at any task and works intensely for a set length of time and then takes a break before continuing, and does this on a regular basis they are usually more efficient than someone who just works straight through without a break. MichelleJ
Video Resources - Awesome resources - thank you Andy. I've been working on the book trailer creation and promotion chapters in my next promo book and this info is wonderful. There will be a couple more links to resources included in the book. Can you tell us some more about the Super program? I'd have to run it on my desktop after looking at the system requirements. It looks like it will do all sorts of things. Shri
Victoria's Secret - Too Sexy? - This will be upsetting for some men. I just heard a report about Victoria's Secret and it was interesting. Their sales were down drastically in the 4th quarter of 2007 and the report was about how they are thinking the company has gotten too far away from the heritage that made it the blockbuster company it is. They are thinking the ads etc have become too sexy and the plan (at the moment) is to make the ads more sophisticated. That would be like the Super Bowl commercial which was very tasteful, but very different from any Victoria's Secret I've seen lately. Who do you all think the current sexy ads are targeting? I think its the men that they hope will buy these items for their female significant others. I hate to give Omarosa any kudos - but most women aren't "sold" on an item by an ad of a near naked sexy woman. Shri
Re: How To Be Rich - [quote="TheRainmaker":tst8wsa8]Sounds great. What exactly have you found to be eye opening??[/quote:tst8wsa8] The first eye opener was measuring wealth by your total assets 1 Million - 2 Million Pounds The Comfortable Poor 2 Million - 5 Million Pounds The Comfortably Off 5 Million - 15 Million Pounds The Comfortably wealthy 15 Million - 40 Million Pounds The Lesser Rich 40 Million - 75 Million Pounds The Comfortably Rich 75 Million - 100 Million Pounds The Rich 100 Million - 200 Million Pounds The Seriously Rich 200 Million - 400 Million Pounds The Truly Rich 400 Million - 999 Million Pounds The Filthy Rich Over 999 Million Pounds The Super Rich


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

TOP Level Selling

Starting a Business a Brave Move or a NoBrainer

Setting Goals for your Home Based Business

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.