Young Aussie’s $3,500 superannuation ‘win’ following haunting money realisation: ‘Absolutely crazy’
Hana Anderson switched her superannuation investment strategy after realising she was getting just a 3 per cent return. (Source: Hana Anderson/Getty)
A Perth woman is urging young people to take a closer look at their superannuation after she was able to boost her balance by thousands with one “easy win”. New research has found even a few small tweaks now could leave you tens of thousands of dollars better off in retirement.
Hana Anderson said she started paying more attention to her superannuation after an experience with a past employer where she wasn’t being paid what she was owed. The 25-year-old social media strategist told Yahoo Finance this made her realise how important it was to be on top of her super, including her investments.
After reading about the difference investment strategies could make, Anderson said she was motivated to check her own investments. That’s when she discovered she had been inexplicably placed in a conservative option since she started work at 17.
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“The growth on the account was only 3 per cent, which is absolutely crazy. It kind of haunts me that it was that low for many years,” she said.
Anderson ended up seeking advice from her superannuation fund, who was able to help her determine which investment strategy was right for her risk tolerance and age.
She ended up switching to her fund’s high growth investment option at the start of last year, which had one-year returns of about 12 per cent and had averaged 10-year returns of 9 per cent.
“My return last year that I received was like $3,500, which was really good,” she said.
Anderson, who is now self-employed, said she has been making extra super contributions of $10 a week for the last few years.
Her balance is currently $38,500. In comparison, ATO data found the average balance for a 25 to 29-year-old was $24,821 for females and $27,021 for males.
AustralianSuper modelling found an 18-year-old starting work on $56,000 can expect a balance of $556,000 when they retire at 67.
If they decided at 20 to change their investment from balanced to high growth, they could expect to retire with a balance of $641,000. That’s $85,000 more than if they hadn’t taken the action to be more aggressive.
Australian Super’s head of retirement Jacki Ellis told Yahoo Finance even small tweaks could make a big difference to your financial future over the long run.
“Most super funds will offer a range of investment strategies. There’ll be a default strategy that if you tick that box and move along, your super fund will select for you. But it’s also possible for anyone to choose how they want their money invested,” Ellis said.
AustralianSuper’s Jacki Ellis said young Aussies could make a few simple changes that could make a big difference to their retirement. (Source: Supplied)
Strategies will usually range between lower growth to higher growth, and can fall into categories like high growth, balanced, conservative balanced, and stable.
“The key difference there is the amount of exposure to investment risk built into those investment options,” Ellis said.
“The more an investment might move up and down over time, then typically, investors will get a higher return for those sort of investments over the long term.
“It’s an important thing to think about when it comes to your super and the best time to do that is now. It’s never too early or too late to start planning for your financial future.”
Ellis said it was important to think about your personal circumstances and preferences.
“You’d really want to be thinking about what your goals are, what your risk appetite is, how long your money is going to be invested,” she said
“For example, for younger members, because your superannuation can’t be accessed until you retire, which is usually a long way off, that really long time horizon gives time for the market ups and downs to even out over time, so you can be more confident that an investment option will achieve its targeted return over the very long term.
“That time horizon gives younger people the capacity to invest in higher risk options and really enjoy the higher returns over the long term for those investment options.
“That can be as simple as substituting a coffee a week for a contribution into your super fund, or making use of the government’s co-contribution,” Ellis said.
“Low or middle income earners might be eligible for a co-contribution of up to $500 a year from the government where they make an after-tax contribution, which is called a non-concessional contribution.”
Thirdly, keep tabs on your money and make sure your employer is paying your contributions correctly into your fund. Most super funds will have apps you can use to check.
Ellis recommended people check in with their super every year. Most super funds will offer free advice at no extra cost, along with online resources for people.
Anderson has urged young people to start talking about super with their parents and their friends.
“It’s a conversation that seems light years away, but knowing that compound interest is the eighth wonder of the world and knowing that the biggest asset that you have is time, the longer that you put it off, the less of a difference you can make for yourself,” she said.
“Especially if you’re looking to grow your wealth in easy ways without having to work your life away. It’s just such an easy win for young people and they just have no idea.”
