When you are just starting out, or are in the first few years of your working life, retirement might seem like a far-off concept, but you can never plan for your future too early. One of the best ways to set yourself up for a comfortable retirement is to engage and consider superannuation as a super savings vehicle early in your career.
At Crescent Wealth, we understand the importance of planning for retirement, and we want to help young workers, like you, get started on the right foot.
The importance of planning early for retirement
Planning for retirement can be daunting, but the earlier you start, the easier it becomes. By starting to invest in your superannuation early, you can give yourself the best chance of achieving your retirement goals.
To get started, it's important to set some retirement goals, so you have a target to work towards. You should consider how much income you will need in retirement, and how much you will need to save to achieve that income.
Once you have a goal in mind, you can start to work out how much you need to contribute to your superannuation each year to achieve that goal. This might mean sacrificing some spending now to invest in your future, but the benefits of compounding mean that the sacrifice can be well worth it in the long run.
Compounding is a super way to save
Put simply, compounding is the process by which your investment earns interest on the interest that has already been earned. In other words, the interest on your investment is reinvested, and you earn interest on the new total, rather than just the original investment amount.
This might not sound like a big deal, but over time, it can make a huge difference to your retirement savings. By making extra contributions to your superannuation early, you can take advantage of the power of compounding, which means that even small contributions can grow into a significant amount over time.
There are many ways, aside from employer contributions, you can add to your super balance today to help achieve the retirement lifestyle you want down the road. You can make a before-tax contribution to your super by sacrificing part of your pre-tax salary. This could reduce the amount of tax you pay if you pay more than 15% tax on your salary.
You can also make after-tax contributions from your take-home pay. Plus, if you’re a low-income or middle-income earner, the government could also make a contribution (known as co-contribution) to your super, up to a maximum amount of $500.
For example, If you add an extra $10 a week to your mandatory employer guarantee contribution at the age of 20, by the time you reach 67 you could have an extra $15,000 in your superannuation account.
Investing in your superannuation early is one of the best ways to set yourself up for a comfortable retirement. By taking advantage of the power of compounding and planning early, you can give yourself the best chance of achieving your retirement goals. At Crescent Wealth, we're committed to helping young workers like you get started on the right foot, so don't hesitate to get in touch with us today to find out more about our superannuation options.
