Julia said she had the superannuation balance of a 60 year old thanks to years of salary sacrificing. (Source: SBS)
An Australian woman has revealed how she has built up the superannuation balance of a 60-year-old, despite only being in her thirties. Australia’s superannuation system holds more than $4.1 trillion in retirement savings, but some have argued it's benefiting some and not others.
Julia is only 37 and already owns multiple properties, a caravan, two boats, has three university degrees, and has travelled to Europe more than 20 times. She comes from a migrant family where money was openly discussed, and said this meant she developed strong financial habits early on.
“I have been aggressively salary sacrificing since I was about 15 years old, since I first started working my first library job as a shelver putting books on the shelf,” she told SBS’s Insight.
Salary sacrificing is when you choose to 'sacrifice' part of your before-tax salary and add it directly into your super account.
Julia said she recently salary sacrificed more than a quarter of her yearly salary and ideally planned to retire in the next decade at the latest.
“Based on the online calculators, the projections in today’s monetary terms would put me at approximately $1.6 million if I don’t do any more salary sacrificing and just have the SG [super guarantee] from my workplace,” she said.
When asked her advice for other Aussies, she said her "controversial" opinion was to avoid getting married and consider refraining from having children.
“By the time that kid leaves your home, it would have cost you as much as a Lamborghini," she said.
"And you could be driving a Lamborghini, or that sum could be sitting in your superannuation [and] growing."
University of New South Wales data found the average Australian household would spend between $100,000 and $300,000 for each child they raised to the age of 17. That's about $700 per month per child.
The woman also said people should not underestimate the power of compound interest and put more focus on their superannuation.
Super system not working for all Aussies
Julia’s situation was in stark contrast to other Aussies who appeared on the SBS programme.
Damian, 56, said he was living week to week while working part-time in a call centre and renting.
He said he expected to keep working until his “body falls apart” and said his super likely wouldn’t be enough to support him in retirement.
He said the super system didn’t work for people in his situation.
“I’ve been in insecure work, I’ve worked casual jobs, I’ve done a bit of cash in hand when I was on the dole,” he said.
Damian and Belinda said they didn't think their superannuation would support them in retirement. (Source: SBS)
Belinda, 55, said she was “concerned” about what her retirement would look like. She spent 14 years as a carer for her husband, John, after he was diagnosed with blood cancer and didn't contribute to her super during this time.
"We had to actually raid it a couple of times and take money [out] when things were really bad and tough," she said.
Belinda said she didn’t think there was an “equal superannuation system”, with many people, particularly women, coming out of long-term caring roles and left with “nothing”.
Donna, 59, said she felt she had “missed the boat” and hadn’t saved enough in superannuation for a comfortable retirement.
She said she was “scared” as she was now approaching retirement as a single woman and would be renting. She shared that more than half of her income was going towards rent.
These people are not alone. A poll of more than 7,500 Yahoo Finance readers found 65 per cent felt they wouldn't have enough super by the time they stopped work to have a "comfortable" retirement.
Economist calls for super to be scrapped
Cameron Murray believes Australia’s superannuation system should be scrapped altogether.
The economist said super is “heavily skewed” to the top 20 per cent of earners.
As a result, he felt that getting rid of the system would mean we could close tax breaks used by wealthier people, and young people would have more of their income to spend when they needed it.
"The super system is quite interesting because we think it's there helping all of our retirements and giving us all a fair chance. But it actually amplifies all of the inequalities of working life into those retirement years,” he told SBS Insight.
"I think the important point as a policy question [is] it’s skewed to the people who would never be on the age pension and would be independently wealthy at retirement age anyway."
Independent financial adviser Andy Darroch argued the system was the “envy of the world” and while there needed to be tweaks to the scheme, it ultimately shouldn’t be scrapped.
"Australia is the only country on earth that you can have a nurse and a diesel fitter get to age 65 with close to $1 million in super," he said.
Superannuation changes coming
Superannuation earnings are currently taxed at 15 per cent during the accumulation phase.
But the government has announced plans to change this, and double the rate to 30 per cent for balances above $3 million.
The government said the change would apply to around 80,000 people, or about 0.5 per cent of the population by wealth.
However, concerns have been raised over the fact that the proposal in its current form would include unrealised capital gains and the threshold won't be indexed.
This week, the super guarantee rate increased from 11.5 to 12 per cent, marking the final legislated increase to the amount employers must pay to your earnings.
