Retirement realities: How today’s decisions can shape your future


No matter your age, when you’re busy with the never-ending demands of work and family, retirement can seem a long time away and planning for your future can be all too easy to ignore.

But the day you farewell work will arrive more quickly than you think - and the financial calls you make now can have a dramatic effect on the shape of your superannuation and retirement.

Here are three decisions you can make today to help boost your future financial security.

Make extra contributions

There’s a reason making extra contributions towards super at a younger age can be so powerful - and the reason is compound interest.

Compound interest is magic, says KPMG’s Linda Elkins.

“It’s just magic,” says Linda Elkins, national sector leader for Asset and Wealth Management at KPMG.

“The magic of compound interest that small amounts invested earlier will be more powerful, and can avoid you needing to make larger contributions later on,” she says.

“Thinking about your contribution rate as early as possible is a good thing to do.”

Lynda Cross, the head of guidance at Aware Super, offers some figures to illustrate this.

“A 37-year-old planning to retire in 30 years, at the age of 67, who contributes an extra $50 a week into their super, assuming a 6.7 per cent return, could boost their retirement savings by around $124,000 by age 67,” she says.

“Increasing that to $100 per week could result in an additional $248,000.”

To decide whether you should make extra contributions, how much they should be, and the most tax-effective way to make them, do some research, talk to your super fund, or seek the advice of an accountant or financial planner.

Consider your investment options

How your super is invested now can make a big difference to your nest egg in the future.

“Investment returns are likely to make up around 50 per cent of your super balance at retirement,” Cross says.

Starting early when it comes to retirement planning can make all the difference.Credit: Simon Letch

Elkins says there are a couple of factors to consider when deciding how your super is invested.

“The first is choice of fund: which super fund am I in?” she says.

“There are good tools to help people get the information to consider that; the ATO has a portal where you can compare funds.

“The second question is: should I go in the default investment option, what’s called the MySuper option, or should I make an individual investment choice?

“Usually getting some financial advice before thinking about investment choice is a good idea.”

If you’re considering switching to a lower risk, higher risk, or sustainable investment option, Cross says your super fund can help you decide.

“Since most super funds offer guidance at no extra cost, it’s worth speaking with them to ensure you’re in the right investment option for your age and risk profile,” she says.

Make sure you’re on track

Understanding how much you will need in retirement, and checking whether you are on track to achieve that, is “super, super important”, Elkins says.

“The earlier you do it, the better.”

Cross says: “The best time to start planning for retirement is now. While it can be hard to think 15 or more years ahead, starting early can make a significant difference to your financial position later on.”

The first step, Cross says, is to calculate what you’re spending now and then think about the lifestyle you’ll want in retirement, allowing you to work out how much your annual expenses will be.

“Most people need around 70 per cent of their current take home pay to maintain their lifestyle in retirement,” she says.

An online retirement planner can help you check if you’re on target and model the impact of variables such as making extra contributions.

And, of course, advice can help. When retirement day does roll around, the 88 per cent of us who have never spoken to a superannuation or retirement planning expert (according to Aware Super’s research) may wish we’d done things differently.

“Seeking expert advice can help boost retirement success,” Cross says.

“A well-planned retirement strategy can help ensure you have enough money to support the lifestyle you want and deserve in retirement.”

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.