Financial adviser Jess Bell has nearly $130,000 in her superannuation account. The 30-year-old told Yahoo Finance this meant her balance was “more than double” the average for men and women in her age bracket, which is currently $55,690 and $46,586, respectively.
Bell said one reason why she was ahead was because she has been salary sacrificing for the last 10 years. Salary sacrificing is when you ‘sacrifice’ part of your pre-tax salary and add it directly into your super account.
“I started off with $50 a week. After tax it was $36 and it didn’t feel like I was having to sacrifice a lot. I just thought surely any little bit is better than nothing and if I start from the get-go then I’m not going to notice the difference,” Bell said.
Bell said she increased the amount she was salary sacrificing to $75 a week a couple of years ago and is considering bumping it up to $100 a week next year.
“I’ve got to take into consideration what my employer contributions are as well [and] make sure that I stay within the total concessional contribution cap,” she said.
Do you have a story to share? Contact tamika.seeto@yahooinc.com
Bell said doing research at the start of her career and comparing superannuation funds also helped her grow her super, including ensuring she was with a low-cost fund and her investments suited her personal risk profile.
“I think it’s really important for people when they’re looking at their super to understand all of their options within their funds, especially those industry funds where you do sort of pick off-the-shelf items, it is really important to make sure that it’s aligned to their preferences,” she said.
Bell said the compounding impact of her super distributions was another reason why her super had “grown quite astronomically” in comparison to the average.
What is the average super balance by age?
If you’re wondering how your superannuation stacks up, the Australian Taxation Office (ATO) has revealed the average balances for men and women in different age brackets.
The Association of Superannuation Funds of Australia (ASFA) estimates that to retire comfortably, a single homeowner would need $595,000 and a couple would need $690,000.
This would give them $52,383 and $73,875 annually with a mix of super and a part-age pension.
ASFA’s Super Detective tool has estimated that a 30-year-old today would need an average balance of $66,500 to retire comfortably at the pension age of 67.
A 40-year-old would need $168,000, those aged 50 would need $296,000, and someone who is 60 would need $469,000. These calculations are based on receiving a relatively modest wage of $65,000 a year.
Salary sacrificing tips
For Aussies who are considering salary sacrificing, Bell said it was important to keep in mind the concessional contribution cap, which is currently $30,000 per year.
“Part of those contributions are also made up of the employer or the super guarantee contributions,” Bell said.
If you have unused cap amounts from previous years, you may be able to carry them forward to increase your caps in later years if your total balance is less than $500,000.
Bell said it was also worth considering your marginal tax rate, as salary sacrifice contributions are taxed at 15 per cent when they go into super.
“So if you’re on a 16 per cent marginal tax rate, the difference between tax is 1 per cent,” she said.
“You kind of need to think about if the overall purpose is just to add more to super, or do I also want to be considering what it’s doing to my overall tax position?”
Bell said you could use MoneySmart’s calculators or pay calculators to get an idea of how salary sacrificing could impact your tax and take-home pay.
You’ll also need to be happy to sacrifice the amount in your super and know you won’t be able to access it for a long period of time.
“There are a few considerations for people, it’s certainly not something that everybody should do because it doesn't make sense for everybody,” she said.
Aussies urged to engage with super
Findex research found only 30 per cent of Australians knew their super balance to the nearly $1,000 and a further 30 per cent only had a vague idea of their balance or had no idea at all.
Recent Commonwealth Bank research similarly found 33 per cent of people didn’t know their super balance, while 11 per cent had never checked it at all.
Bell has encouraged people to engage with their superannuation and said some people may be in for a “rude shock” when they retire otherwise.
"It is going to be, for most people, the second largest asset that you have in your life outside of your home. So why wouldn't you worry about that?" she said.
“Be proactive and take control of managing your super. It is crucial for your financial future."
