Why you should start saving for your retirement in your 20s
21 September 2018
With all the challenges of getting a job, finding a way onto the property ladder or even starting a family, saving for retirement can feel like a chore you could do without. Here are three reasons why you should start now.
To put it simply, the longer your timeframe for saving and investment the more risk you are able to take and so the greater your chances of seeing good returns on your hard earned cash. Riskier investment options may see substantial dips to value in the short term, however in the long term (in 10+ years) these options tend to have greater returns. With retirement still many decades away, young investors are more immune to yearly ups and downs and so you can ride out the storms to get greater average returns much further down the line.
2. Get into good habits early in your career
Sometimes establishing good habits is just as important as making the numbers work. It may feel like now is the hardest time in your life to save. Low starting salaries, student debt to pay off and skyrocketing rent makes putting a bit away each paycheck can feel like an impossibility. But sadly it doesn't get any easier. Mortgages, funding a growing family, traveling—there is always going to be something getting in the way of your financial goals.
Getting into good habits early in your career will set you up well for the future
Get in the habit of saving now so that you establish the routine of putting money away for the future.
So what's the first step? Getting your super in order
In some way Australians are compelled to start their preparation for retirement. Our compulsory super system means that your employer is contributing to your super right from the start of your career.
Getting your super on track is a great way to prepare yourself for a comfortable retirement. Here are some tips to make the most from your super:
- Check your employer's contribution: If you are over 18 and earn over $450 a month from a single employer you are entitled to an employer contribution of 9.5% of your ordinary wage which must be paid at least every three months.
- Roll your super funds into one: Having multiple super funds means you have to pay more fees and makes paper work an ongoing struggle. Consolidate your super into one fund. If you’re an LGS member, you can easily consolidate your super in just a few clicks.
- Make sure you haven't lost any super: Many people lose track of the super accounts they may have only had for a short time. You can find and reclaim lost super through the myGov website.
- Work out a salary sacrifice plan: You can make contributions to your super account on top of the 9.5% that comes from your employer. This can really help to boost your super balance and make up for periods out of work. Salary sacrificing is one of the simplest and most effective super saving strategies; it reduces your taxable salary and as a result, you may pay less income tax.
- Take advantage of government contributions: If you earn less than $52,697 and make after-tax super contributions, you could be eligible for the government co-contribution. The government co-contribution is an initiative whereby the Federal Government contributes up to 50 cents for every $1 you personally contribute (in after-tax dollars) to your super.
At LGS we offer investment options and financial advice to help you develop your savings plan. Get in touch with our team to learn more about how you can start saving for your dream retirement.
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