Why Millennials should picture themselves (and their super) at 60

Millennials out there: Have you taken a moment to picture yourself in your 60s lately?

Chances are, you haven’t had the time. Whether you’re battling to save for a house deposit, have started raising kids, or are focused on your career, you likely have a few other things to think about before daydreaming about life as a glamorous retiree.

Millennials have been contributing to super for 10 or 20 years at this point, so it’s time to lift the lid on what you’re invested in.Credit: Aresna Villanueva

But whether you can imagine retirement or not, the fact is that 11.5 per cent of your earnings are most likely flying into a super fund to prepare for that moment.

Advisers and experts say that even if you’ve got many other goals on your plate right now, you’re in the perfect position to maximise the benefits of your super savings. You’ve also got the time to get back on track if you need to, as well as minimise any risks to your final balance.

Here are three things they recommend you add to your super checklist.

Get to know your investments and how they’ll grow

You’ve likely been contributing to super for 10 or 20 years at this point, so it’s time to lift the lid on what you’re invested in.

There have never been more options for how to invest your super savings, meaning you have a choice about where to place your money based on your specific risk appetite and values. You can find out what your super is invested in by logging on to your account or calling your fund.

The head of operations at Parc Wealth Management, Michelle Bryant, says many funds place super savings in a default “balanced” option, but that might not be in line with your preferences.

“With the long-term time horizon that Millennials have before they retire, ensuring your superannuation’s asset allocation is in line with your risk tolerance can make a significant difference to the amount of money you have upon retirement,” she says.

Director and financial adviser at Pursue Wealth, Sam Robinson, says now’s the time to check whether your funds are on track.

“Millennials should be benchmarking their super against an appropriate retirement goal… as a rule of thumb, aim for 20 – 25 times your desired living expenses and being mortgage-free,” she says.

Most super funds have their own calculators which can model what your savings might deliver at retirement. ASIC’s Moneysmart website also has a tool. These calculators are all built slightly differently, so it’s worth reading the disclaimers about how each one works.

If you find you aren’t on track, you have the time and power to consider ways of catching up, like making additional contributions, says Robinson. “This is the ideal time to seek financial advice, review the level of contributions and maximise your investment strategy.”

Plan for career breaks

Making a change to your regular contributions – whether that’s when taking time away from paid work to raise children or quitting your job to spend a year travelling – can end up impacting your final retirement balance.

“For those who are taking time off work which may be due to becoming parents or taking a sabbatical, you don’t want your super to fall behind,” Robinson says. “Consider additional contributions to continue to grow your fund, or if you have a partner consider superannuation splitting or additional contributions for those years.”

From July 1, 2025, superannuation will be paid on government-paid parental leave for the first time, but it’s still a good idea to consider the impact a change in work patterns will have on your funds.

If you’ve taken time out of paid work, but your partner is still working, there are ways for them to contribute to your fund, either by splitting their contributions with you or making a direct payment into your super. The ATO gives a basic outline of these policies here.

Early withdrawals as a last resort

One of the key features of super is that your money is locked away for decades, slowly growing for your retirement in a space where you can’t get your hands on it.

But Millennials may remember there have been exceptions to that rule in recent times, with 2.6 million people applying to make an early withdrawal from their super in 2020 as part of the federal government’s COVID early release program.

Australians can also apply for a compassionate release of their super savings in specific circumstances, including to fund medical treatments like IVF or dentistry. The numbers suggest that this is becoming more common.

Australian Taxation Office figures show there were 75,600 applications for the early release of super in the 2022-23 financial year, up from 53,800 applications in 2018-2019.

Founder of Zebra Tailored Wealth, Alysia Laird, says even though Millennials may face unexpected costs at this stage of life that need to be covered, you should think carefully about the long-term impacts of taking out super before retirement. It’s important to think about the effects of withdrawing funds on your long-term super balance.

“I would try to have them find any other way rather than accessing their super, which is what we are trying to build,” she says. “It can be very short-term thinking to grab something that is for your future to help in your immediate life – I’d try to not let that happen.”

This is the third part of our six-week Gen Super series, which takes an in-depth look at what to do with your superannuation at each age, from Gen Alphas just starting in their first jobs to Baby Boomers, who are just starting to retire – and beyond.

• Advice given in this article is general in nature and 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.

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This story was created in partnership with Colonial First State. The content is independent of any influence by the commercial partner.