For any non-Australians reading this, superannuation or “super” for short is currently the main method to save for retirement in Australia. Your employer must pay a percentage of your earnings into your super account, and your super fund invests the money until you retire.
On top of the standard amount that your employer invests, you can invest extra money to boost these savings. It is a great way to boost your net worth and generate wealth. It is an excellent concept that will ensure that Australians will be financially comfortable during their retirement and I am truly grateful it was introduced. However, I will never make extra contributions on top of what my employer provides.
Disclaimer: This is all my personal opinion and this strategy suits best for my personal circumstances. I am simply sharing my perspective rather than making a financial recommendation. Please take it with a grain of salt – I can’t stress this enough! Have a chat to your financial planner or do your own research before you make any investment decisions.
Alright, let’s get into it.
- Lack of control
Unlike retirement funds in other countries, withdrawing money out of super before retirement age is hard. You cannot simply do this just by accepting a financial penalty. I’m in my 20s, which means I can access my super at 60. There are exceptions to this such as financial hardship, but even that is for extenuating circumstances.
I am not comfortable with the idea that the government decides when and how I can access my own money and at what age I should be retiring. And let’s be honest, sh*t happens – medical issues pop up, your loved ones start needing care or maybe you’re burnt out from four decades of work and just want to retire now. I want to be in control of my own financial future.
2. Changing policies
Superannuation rules are not set in stone and can be changed by the government. I worry if the age that you can access these funds will be pushed back, as it is a very real possibility. Other rules such as the tax rate of super can also be increased. Since I don’t know what super rules will be like in the future, I cannot plan appropriately using these funds. For example, if the super access age is increased to 65 or even 70 instead of 60 – Grandma Money Marketer might be forced to go back to work when she is old, burnt out and just wants to retire already.
3. The employer contributions are enough
This is personal to my circumstances, but the employer contributions will be enough for me to retire on. I started part-time work at 15 and transitioned to full-time at 19. This means that my super funds will have 45 years in the investment market before I can access them. As we know, time in the market is one of the most powerful financial forces. Even with making a median salary, I should still be able to retire with a seven figure sum at the age of 60.
So, what do I do instead?
Instead of contributing to super, I instead invest my funds in my share portfolio. This way, I have the freedom to access my funds whenever and however I want. I can retire at 50 or quit my job to take care of an aging loved one – on my own terms.