Figuring how to put your superannuation into better shape
NOT happy with the state of your superannuation? Barefoot Investor has advice on how to get you and your finances looking a lot better.
Barefoot Investor
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WHEN you’re tubby, you can’t hide it. Your muffin top is on display for the world to see.
When it comes to wealth … you can hide a lot of financial lard in a leased Lamborghini.
Yet if you flashed your financials to the world, how do you think you’d measure up?
That’s a question I was asked this week from Leanne, a 36-year-old reader, so I thought I’d use it as an opportunity for everybody to down their daks and let their super balance wobble about.
YOUR HIP POCKET: FEEDING FRENZY ON SUPER HONEY POT
Here’s a chart from the Association of Superannuation Funds of Australia (ASFA) which shows the average super balances for men and women based on age.
How do you compare?
And if you’ve read this and you’ve come up short, my answer to Leanne will help you buff up your super.
Tread Your Own Path!
SEEKING MORE SUPER
LEANNE ASKS: Recently on Facebook a woman around the same age as me (36) asked how much super others had.
This resulted in many women of a similar age posting that, despite taking time out to raise kids, their super was well into six figures.
Curious, I ran my numbers through some online calculators and freaked out!
I am currently single, earning $58,000, with no kids, and have only $56,000 in super. What can I do, apart from after-tax contributions, to boost my super?
BAREFOOT REPLIES: You’ve just asked the financial equivalent of “does my bum look big in these pants?”
First up, I wouldn’t give a pixel about random people crowing on social media about the size of their … assets.
Second, your balance will generally be a function of when you started work, whether you take time off (for kids, illness, Eat Pray Love), and what you earn (the more you earn the higher your employer contributions, and the greater your ability to chip extra in).
Still, I’m as competitive as anyone, so I hunted down the figures for you (see table above):
The average super balance for a woman your age is $64,590, according to ASFA. So you’re about middle of the road for women your age.
Yet what really matters is what your super looks like on the day you retire: the average balance for people at the time of retirement in 2015-16 was $270,710 for men and, frustratingly, only $157,050 for women.
Thankfully, you’ve still got over three decades to fit into your super spandex pants.
Here’s what I’d suggest you do. Go to the government website moneysmart.gov.au, head over to their superannuation calculator, and punch in your details.
Actually, I’ve already done it for you, and here’s what I found: based on your age, income and super, you’re on track to retire with $247,623. (This figure is in today’s dollars … after taking into account inflation.)
Not bad, but let’s move the dial. If you switched from your super fund’s default “balanced” option into a “high growth” option, the calculator suggests you’d boost your fund by about $20,000, to $267,941.
And if you switched to a low-cost fund, you’d increase your end balance by almost $50,000, to $297,609.
Better in your pocket than a bank executive’s!
And once you buy your first home, you might consider salary-sacrificing an additional 5.5 per cent of your wage into super (making 15 per cent overall — see “Barefoot Step 5” in my book), which would boost your end balance by more than $150,000 to $402,663.
Yet the single best thing you could do right now is to work out a way to earn $5000 more a year.
You can do that by preparing well for your end of year review — by working hard and setting performance goals — and then asking for a raise.
Or starting a side hustle.
Being single gives you more flexibility to try some of these options.
There are a lot of ways to do it (again, see my book).
And one more thing, don’t compare yourself to anyone else. The only person you’re competing against is yourself.
TIME IS PRICELESS
CHRIS ASKS: I have a spinal cord injury and am paralysed from the chest down.
I am self-employed and lucky enough to have a wonderful wife and two great kids.
Health-wise, I probably have 10 good years left, as I have been in the wheelchair now for 20 years and kidney problems tend to happen at the 30-year mark.
I am 46 and earning $80,000 and I want to put my kids through private school, but I also want to see them grow up, not just work and come home exhausted.
What is your advice?
BAREFOOT REPLIES: I’d seriously consider not sending your kids to private school. Why?
Because you say you have 10 good years to spend with your kids.
Personally, I’d rather spend less time working — and less time stressing about work — and invest that time into your kids.
If I were in your situation, I’d do two things.
First, set up a direct debit into an online saver, so that you put your savings on autopilot. Second, spend that money on experiences you can do with your kids: travel, sporting events, hobbies.
Good luck, and good health.
AND, RIGHT ON CUE …
TANIA ASKS: I have five beautiful new stepdaughters.
They all live nose-to-device, get cranky when offered advice of ANY kind, “don’t like to read”, and have massive holes in their hands.
All of them work, yet promptly spend it and/or are paying off maxed-out credit cards/bank loans (already!).
They think living in debt is just life, what “everybody does”.
Which of your books is best for young people with zero attention span?
How can we get them interested in making a positive change?
BAREFOOT REPLIES: A cynic would suggest I trawled through thousands of emails to find one to plug my new book. I didn’t … but maybe it’s the universe sending some self-promotional vibes my way.
In any event, I’d suggest you get my new book, The Barefoot Investor for Families, which is now available for pre-order.
If the girls are still living under your roof, you have more influence on them than you know.
My new book sets out 10 very special “Barefoot Money Meals” to give them experiences that will change the way they think about money. (I’d suggest you go straight to Chapter 4: “Breaking the Brat”.)
BAREFOOT’S NEW BOOK
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins) RRP $29.99
Pre-order now from heraldsun.com.au/shop or from Dymocks bookshops
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice
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