A little early can become a lot later

When you’re young, it feels like forever until you’re going to be able to get your hands on your super. Money you put into super now is literally decades away from being accessible. It can feel uncomfortable to set much-needed money aside for so long.

On top of that, there is the chance that you might have kids now. This could mean one or both partners are working part-time, on top of the cost of feeding, clothing and entertaining a family. Locking money up for the long-term might not feel comfortable.

But a small amount could have more of an impact than you expect. Let’s have a look:

Putting in extra money

It might be news to you, but $10 extra a week now could be the equivalent of $70 a week by age 65.

Let’s show you an example to explain what we mean:

Charlotte puts $10 a week extra into her super from her 30^th birthday until she’s 40. She then stops putting extra in and leaves it untouched until she retires at 65. Just those $10 amounts could have grown to about $54,000 by age 65. That’s ignoring any amounts that her employer puts into her super and ignoring the amount she already had in super when she was 30. $10 a week for 10 years could result in $54,000 extra*!

Michelle, aged 55, on the other hand, hasn’t thought about super until now. She wants an extra $54,000 at retirement at 65, just like Charlotte is aiming for. To achieve this amount, Michelle would need to put an extra $70 a week into her super for the next decade**. It would take her 7 times the amount to reach the same outcome as Charlotte!

A difference

The difference is because, while Charlotte has decades to take advantage of the power of compounding (where she earns investment returns on top of her investment returns), Michelle doesn’t have the same time for her contribution amounts to compound.

It doesn’t mean Michelle wouldn’t benefit from putting aside some extra money for retirement. It just means that she will have to work harder to get a similar result.

Whether you’re in paid work at the moment or not, if you can spare $10 a week, it could make a real difference to your retirement balance.

And this example just shows what could happen if you put $10 a week into super for only 10 years. Imagine what could happen if you put $15 or $20 a week in, or if you put $10 a week in right through until retirement!

Spouse contributions

Your spouse is able to put money into your super too. If your taxable income is under $40,000 year, they can contribute up to $3,000 into your super and may receive a tax offset.

This can help boost your super, as well as giving them a tax offset to claim.

You can read more about spouse contributions on our Types of Contributions webpage.

Splitting

Spouses may be able to split some of their super contributions to each other. Doing this can help boost the super balance of the member receiving the split contributions, but it has other potential benefits too:

1. It could help you stay underneath the Total Super Balance cap
2. It could increase the balance of your spouse’s super and take advantage of 2 lifetime balance caps
3. If your spouse is younger than you it may help increase your eligibility for age pension
4. If your spouse is older than you it may mean you can have access to your super earlier

There are limits and rules around how much you can split. Read more about the conditions on the Splitting Contributions webpage.

*Assumptions used: a 7.8% annual return on super, weekly $10 deposits, monthly compounding, no admin fees, no insurance premium.
**Assumptions used: a 7.8% annual return on super, weekly $70 deposits, monthly compounding, no admin fees, no insurance premium.

We used the government’s MoneySmart Compound Interest Calculator to create our scenarios