13 Oct 2014

In school, you’ll learn how to find X, tell a verb from an adjective and hopefully know your Austria’s from your Australia’s. But there’s something missing from the curriculum, and it’s not just how to change the oil in your car–it’s superannuation.

Superannuation is an important component for our lives in the distant future and somehow it’s not important enough to be covered by the school curriculum, but fortunately we’ve got you covered with the what, why and how of saving for retirement.

The what

Superannuation is a word you hear a lot when you start working but is rarely really explained to you in detail. You’ve probably spent a good one minute asking our reliable friend Google what ‘a superannuation’ is, but too many words caused you to click out of the browser and continue watching cat videos on YouTube.

The Association of Superannuation Funds Australia (ASFA) is a good name to remember. This organisation keeps us updated about the approximate savings we’ll need in retirement. As it stands, a single person living a modest lifestyle in retirement can expect to spend about $23,283 per year. If you want a ‘comfortable’ lifestyle, the ASFA currently recommends saving enough to live off $42,254 per year as a single person. Aussies currently have to wait until they’re 65 to retire and get a government pension, although this will be up to 70 by the time current school leavers will hit their golden years, according to the latest Federal Budget.

The why

It’s difficult to picture what we possibly could be doing in a year’s time, let alone in 50 years time. The desire to travel, meet new people and complete our bucket lists will be present, but those are things we will be unable to do if we had no money in the bank.
If you were to reach retirement without a sufficient super fund, those years you plan on spending completing your bucket list will instead be spent looking at your bank balance and finding ways to scrape by. Insufficient savings come retirement may mean you’ll need to continue working past retirement age, look at finance options such as reverse mortgages, or even move in with your kids!

The how

To help keep those situations from becoming a reality, fortunately the government helps us out during our working lives.
For most workers, their employers are required by law to contribute to their superannuation funds. This is referred to as Superannuation Guarantee (SG) contributions. Right now, the contributions are the equivalent of 9.5 per cent of your usual wage.
If you have some extra cash lying around you can choose to contribute it to your super fund as well. This is known as voluntary or personal contributions, which allows you to make a one-off deposit of an amount of your choosing. In many situations, you could also choose to ‘salary sacrifice‘, which is where you elect a higher percentage of your salary to go to your super through your employer.
Like other monetary accounts, you can actively manage your superannuation. Some savvy people manage their super investments, while most people accept the default approach taken by their superannuation fund.

So if we want to tick off take a helicopter trip in the Grand Canyon or drink overpriced wine on a French Riviera cruise, it’s probably about time superannuation was added to the school curriculum, what do you think?