Investing in superannuation in 30's?

I did a lot of stupid things in my younger years - but I'm very happy I salary sacrificed the max amount for a good 5 years. The tax free and asset protection implications are huge in my opinion, and now I can be more "risky" with other investments knowing I have a safety net for retirement. As for not being able to access it - there are many situations where you can (eg. Medical needs). A big advantage for me is that I can change investment strategy whenever I like for a pittance (flat $11 fee in my super with no CGT issues) just by logging in and switching. This is far more flexible than investments outside super.

 

Super funds average returns over the years are 7.5% or there abouts. Maybe less/maybe more moving forward no one knows.

It's not the just about saving tax by salary sacrificing, it's also the investment returns which compound over time. It's protected from others taking it and protection from yourself spending it.

If you need income prior to 60 there's heaps you can do, build a cash buffer prior to 60, sell your house and downsize etc.

Question is can you beat the returns outside super

 

By the time we retire the government will make the retirement age 80 years old. If your waiting till your 65 to 70 to retire then your doing things wrong anyway.

Extra money in super at a young age is like throwing money down the toilet.

 

Not if it’s part of a strategy.

 

A bit of a side question...
Can you create an agreement with your employer to make a salary sacrifice contribution to your superannuation in a single lump sum in June (or close to the end of the financial year) rather than weekly/monthly?

By doing this you'd have better knowledge of how much the employer has already put into your super thought compulsory payments and just salary sacrifice the remaining concessional contribution up to the $25,000 limit.

 

@Frosty - yes you can, you need to talk to your employer well in advance to make sure that they will transfer the contribution pre-30 June. Some may sacrifice their entire last month (or more).

 

Totally disagree.

Anyone who heads off on a Net Worth journey knows that it is full of potholes, steep slopes, flooded roads, ...

Share investments are risky (look at October last year).

Property investments are risky (ask the poor folk in Townsville).

Cash investment are risky (the after-tax returns are way less than inflation).

Hence, a component of every Net Worth journey is risk management to identify, analyse and mitigate risks with each of the above.

Super is NOT an investment; it is basically a trust, an investment vehicle. It can only invest in the above three. If you want ultimate control, set up your own SMSF.

IMHO, super is less risky than other investment vehicles.

 

I have been salary sacrificing the maximum amount for years. It has minimal impact on my ability to invest outside of super and it is building a nice balance. I'm not concerned that the government will retrospectively change my preservation age. I will keep squirreling away my super and investing outside of super. No one else can decide my strategy

 

The trustee (board of governance etc or the members of the SMSF) make the investment decisions.

The funds are pretty well protected from external parties trying to sue.

So the only ways you can lose is through poor investment decisions (mismangement, high fees, wrong investment, not moving out of a market segment or an industry/economic downturn affecting all investment classes).

 

Genuine advice I got from folks that has money and travel that road to their retirement

on pure number nothing beat super vehicle so put in the max you can at your age limit.

Ignore the usual vest interest spruiker about how you cant access it until you retire and rules changes and you can invest better outside super blah blah. Nothing beats Super vehicle bar none, but you don't have to take their the words, look at the action, all reasonable wealth off folks has massive SMSF

it tax effective, it a force compounding and saving all in one place, I did it in my early 30s and by far it one of the best decision I ever made compared to outside investment in properties and shares and it barely make a differences to my life style but now I have a decent chunk of super

 

Your missing the point. If your waiting to 70 (or 80 in 40 years time....) before you can retire and access your super then you suppose well cash it out and give it straight to funeral home or your children...

 

No, I didn’t miss the point st all.

When one accesses their super at 80 in 40 years time, the average lifespan will be 120+ at the current rate of medical advances, etc

 

It's all speculation though, isn't it? I don't base my investment decisions on speculation, there's no point.

• there is no point investing through super because by the time I retire the government could have raised the retirement age to 80
• there is no point investing in property because by the time I retire the government could raise the capital gains tax rate to 100%
• there is no point investing in shares because by the time I retire the stockmarket could have crashed and I lose more than half my wealth

Or my point: there is no point speculating about the future because you don't have a crystal ball and you don't know what will happen. It's easier to make excuses than take action

 

Do what some of my relatives have done and deposited their hard earned cash into their bank account.

We all know how that will turn out in 40 years time.

No speculation there

 

The vehicle is amazing, no one can dispute that!
But I have to agree with @Danieljk101. The thought of investing into something I cannot access until I’m 70 simply doesn’t sit well with me at my current age.

I would much rather use any surplus to try and create assets/cash flow so I can retire 20 years earlier than that.

I won’t argue that when it’s all said and done that investing in super will likely have had a better financial outcome....but I would much prefer to take the risks at my age. I like to invest into businesses, I invest heavily into my own education. Heck I would rather blow some of it on holidays then wait until I’m 70!

Ask me again at 50 and I’ll likely tell you a different story. Point is if I’m relying on super to retire then really I’ll be very disappointed with what I achieved.

 

Super is more like a dam holding back your reserves until your preservation age, totally independent of your other assets. By all means, retire early then take up the tax-free cashflow tsunami at 60. The pension age is something totally different and you don't want to qualify for that.

Linky

 

I do wonder though if, at the back of the mind of some, is the issue of whether preservation rules will be changed at some point.

I've lost count of the number of alterations around superannuation since it's introduction and I don't think that engenders confidence. I probably wouldn't be if I was in my 30's (perish the very thought.)

I have to acknowledge there has been as many or even more changes to taxation outside of superannuation but somehow we adapt and bumble along.

 

But I think we can safely say that preservation age will be lifted. In 30 years time we will be living to 100 without issue so accessing super at 60 won’t make a lot of sense.

The other thing in this whole debate that is taboo but should still be discussed is inheritance. The reality is that by the age of 60, most people’s parents will have passed on and a lot of people approaching retirement will likely inherit a very large debt free, tax free asset.
It’s obviously very risk to assume you will be left anything but it’s another factor to consider in the superannuation debate.

 

When was the last time preservation changed? Was it retrospective? Why did it change?

 

17220.1

Provided that lifestyle factors don't start reducing our life expectancy - we are yet to see the effects of obesity on longevity. Back in the good old days where life expectancy was in the low 70's, roughly half the population smoked, we were unaware/oblivious to many lifestyle choices and would cark it soon after retirement. Nowadays, with obesity being a big thing (evey pun intended), diabetes and other diseases will take their place in the stats and bring our life expectancy down.

Increasing the preservation age is a double edged sword - workers are in the workforce for longer (but may not be employable in their previous careers - either need to be retrained or sit on benefits) but if they are employed and still contributing to super, then this is costing the goverment $$$ in tax concessions (tax forgone on MRT for concessionally taxed contributions).