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It’s never too early or too late to start planning for life after work, but where do you start? If you’re feeling unsure about how your super stacks up, take a look at our simple guide.
While there’s no ‘one-size-fits-all’ approach to superannuation, it can help to understand what you need to focus on at each stage of life.
Endura Private Wealth director Craig Stobbie CFP® says there are some easy principles you can apply no matter your age.
“Super is a long-term investment and is designed to assist you later in life, so you certainly don’t need to make weekly or even monthly decisions to be able to meet your long term needs,” he says.
“The key to super is the regular contributions you receive (from your employer), as this allows your super account to compound returns over time.”
In your 20s
At this age your working life is just getting started. While you might be at the bottom of the career ladder, it’s a good time to get the basics in place.
Mr Stobbie says people in their 20s often find themselves with several super funds, especially if they’ve changed jobs a few times.
“A priority would be to tidy up and consolidate your super into a single fund,” he says. “Consolidating your accounts is easy and can be done through the myGov portal and ATO website.”
At this age, the majority of your contributions are likely to be made by your employer. However, it’s always worth salary sacrificing a little extra, or adding any windfalls, like a tax return, into your super fund if you can. The power of compound interest means the longer these funds are invested, the better they’ll perform for you.
There’s lots to consider when choosing a super fund, like which provider you’ll use, what type of investment is right for you, and importantly, what the fees are.
Mr Stobbie says that those in their 20s have a longer investment timeline, which gives you more time to recover from market ups and downs.
“Whilst everyone has a different appetite for ‘investment risk’, it’s important to note that you’re not able to access your super until age 65 (pushing toward 70) under normal circumstances,” Mr Stobbie says.
“So, at this young age you can consider a long-term investment approach with a higher level of risk, as you can allow short-term volatility to pass over the long-term investment time frame.”
However, not everyone is the same, so you should always seek professional financial advice that takes into account your own personal financial objectives and situation.
By the time you hit your 30s, your career is often well established and you’re starting to be compensated with higher earnings.
Many of the same principles still apply as they did in your 20s. Aim to consolidate your super and review your investments with a financial planner. This is also a good time to put a financial plan in place.
This decade also coincides with many of life’s major events, like marriage, children and buying your first home. Personal insurance becomes much more important at this age, as your responsibilities increase.
“If you tidy up your personal insurances at this stage of life, the application process is often easier as you may not have too many health issues yet (that you need to declare),” Mr Stobbie says. “As you get older, more health issues arise, resulting in more push back from insurance providers, so best to get this organised sooner rather than later.”
By your 40s you’ve often hit your career stride, with access to more senior and managerial positions. A bump in your earnings can be timely, as this decade often coincides with the highest expenses you’ll have in life (think kids, schooling and mortgages!).
By this age, you want to be thinking about long-term financial planning and paying down debt. You still have a relatively long investment timeframe before retirement, so there’s plenty of opportunity to plan for the future.
Mr Stobbie says women need to be particularly active with their financial planning and superannuation in their 40s, as the gender divide becomes more obvious after having kids.
“It’s at this stage that the divide between men’s and women’s super assets becomes more obvious,” he says. “This is due to a number of factors including time off to raise children, caring for others and part-time work.”
“The key thing to remember is that this difference can be recovered later in life, with salary sacrifice and lump sum contributions in your 50’s and 60’s to top up your balance.”
By your 50s you’ve likely hit peak earnings potential. You might even start to see your cash flow improve, having paid off a majority of debts and funded family commitments.
Mr Stobbie says this is where you can start to implement more complex and varied investment strategies, in the lead up to retirement.
Review your investments with a financial planner and make sure they’re appropriate for your age and stage of life. As you near retirement age, you may need to switch to a more conservative approach to investing, to protect your nest egg from market volatility.
Planning for your financial future can start at any age or stage of life. If you’d like to know how you can achieve financial freedom in retirement, speak with a Certified Financial Planner (CFP®) professional today.
General advice warning
The information on this site is of a general nature only. It does not take into account your specific financial situation and needs. Always consider the appropriateness of the advice in relation to your own financial position, objectives and requirements.
About Craig Stobbie CFP®:
Craig has been assisting people make smart financial decisions since 2006. He is the Director of Endura Private Wealth and his aim is to help individuals achieve financial freedom.