Frugal Living

5 things 20 somethings should know about super

by Aussie Debt Free Girl

We are very lucky here in australia to have the Superannuation system and some great advantages to the average australian but so many people don’t know how to use it effectively or really understand how important it is. Super is a Key part of any retirement plan here is Oz make it work for you!

Get a head start on your Super!

Make the most of the wonder that is compound interest by making additional contributions. Super is cumulative and you have 40+ years for it to grow, making even small extra contributions can be game changing especially the earlier you do it!

It’s so easy to fall into the mindset that you’ll worry about your super later on, but something will always get in the way. It is easy to say your young now and just starting out you need the money, next it will be, “I’m focusing on buying a home”, then nit will be “I have a young family to support” and next thing you know your 55 and have next to nothing in your retirement and be looking down the barrel of a life struggling to support yourself on a aged pension.

Change your future, the secret to building long-term wealth is to start small but start early.

One of the easiest ways to do this is to set up a Salary Sacrifice with your employer. Salary sacrifice is where you ask your employer to deduct some of your pay (BEFORE TAX) and put it directly into your superannuation fund. This can save you money on your taxes ( depending on your circumstances)

If you were to contribute just $20 a week from the age of 25 (for, say, 40 years) you’d end up with just under $40,000 in additional retirement savings. That’s a lot of money later, for a very little sacrifice now. 

If you do this I’d recommend setting up your salary sacrifice as a percentage instead, for example my partner’s employer pays the standard 9.5% to his super and we salary sacrifice an additional 5.5% to bring that to a total of 15% to superannuation. This Reduces our tax and means that if he works additional time or gets a raise the money being contributed increases in line with that. We love this Set and Forget strategy.

 You should also consider topping up your super before or during career breaks.

Making personal contributions either prior or during career breaks ensures your super maintains steady.This will help mitigate the impact of time out of the workforce on your overall retirement savings. This is especially important for women.

Many women in their 20s (and some men), will take a significant period of time out of work in their late 20s to early 30s, to engage in unpaid caring work in the home. 

Right now, it is not compulsory for Australian companies to pay super while you’re on parental leave but it is worth a conversation.

Take advantage of the government co-contribution

While you’re earning a lower salary it’s a great idea to leverage the government co-contribution if you can afford to make after-tax contributions. If you’re earning below $51,813 you’ll be eligible for up to $500 in free money for your super account provided you contribute $1000 of your own money.

Make super fair in your relationship with spousal contributions

It’s great to have a discussion with your partner about how you will make super, and saving for retirement, fair in your relationship.There can be a valuable tax benefit in making additional contributions and splitting super contributions between both accounts.

Understand the First Home Super Saver Scheme

The new First Home Super Saver (FHSS) scheme allows you to voluntarily contribute up to $30,000 to your super and withdraw this amount (plus earnings, less tax) to buy your first home. Voluntary contributions include before-tax contributions, such as salary sacrifice, and additional after-tax contributions. This can be an advantage and help you enter the housing market.

Set a retirement savings goal

Spend some time thinking about what you would like your retirement to look like and how much you would like to have in your super account when it is time for you to retire. If you have a clear goal, you are so much more likely to achieve it.

Have you thought about your retirement planning? 


I am not a financial adviser. Anything shared here is my personal opinion only and not to be considered professional advice. You should consider seeking independent legal, financial, taxation or other professional advice to check how this informations relates to your unique circumstances.

ADFG is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this Blog.