Superannuation 101: Starting Early and Avoiding Pitfalls for a Comfortable Retirement
Superannuation 101: Starting Early and Avoiding Pitfalls for a Comfortable Retirement
When you land your first job, there’s a lot to think about. You’re starting your career, managing your first pay cheque, and learning how to navigate the working world.
In the midst of it all, there’s one important financial decision that often gets overlooked: superannuation.
Let’s be real, retirement feels like it’s a gazillion years away when you’re in your 20s.
Who has time to think about super when you’re just starting out? Unfortunately, overlooking super in those early years can cost you big time when you finally approach retirement.
Whether you’re fresh out of high school or university, or even just switching jobs, understanding how your superannuation works and avoiding common pitfalls is crucial to ensuring a comfortable retirement.
Especially for women, who statistically take more career breaks, it’s essential to know how small changes in your super early on can compound over time to give you a more secure future.
Superannuation Pitfalls: What You Need to Know
Superannuation isn’t something that just sits in the background without needing attention.
Many young women fall into the trap of not actively engaging with their super because it seems irrelevant at the start of their careers. Here are some common pitfalls:
- Job Changes and “Lost” Super
If you’re like many young women starting out, you might change jobs multiple times as you figure out what career fits you best. With each job change, your superannuation account can get lost in the system. Employers often set you up with a default fund, especially if you haven’t chosen one yourself. This leads to multiple accounts, each with their own fees, and possibly lower returns.
The solution? Consolidate your super accounts as early as possible. If you’ve changed jobs or states (as I did), your super could be scattered across different accounts.
I managed to track down about $20K in lost super, but that was peanuts compared to the years I’d worked. Don’t make the same mistake—find all your accounts and combine them for better long-term results.
Career Breaks and Forgotten Super
At some point, many women take career breaks—whether to start a family, care for loved ones, or focus on personal growth. While it’s a beautiful choice, one downside is that your super can be forgotten during those years away from work.
If you don’t return to work right away, or if you return part-time, your contributions to super can suffer, leaving you with less by the time you hit retirement.
Pro tip: Even if you’re not working, it’s a good idea to make small voluntary contributions to your super. Every bit helps. Better yet, if you’re married, explore spousal contributions—where your partner can help boost your super if you’re taking a break from the workforce.
Multiple Accounts and Fee Overload
Each superannuation account comes with its own set of fees. If you have multiple accounts, you’re paying multiple fees. Over time, these fees eat into your retirement savings. Don’t let your money dwindle away—take the time to transfer and consolidate your super accounts.
It’s also essential to review the fees you’re paying. Low fees don’t always mean poor performance, but high fees can often erode your returns. Ask questions, compare options, and don’t hesitate to switch funds if you find a better deal. Be proactive about your financial future!
The Real Cost of Super Gaps
Let’s talk numbers. By the time you’re nearing retirement, a married couple will need around $600K combined to lead a comfortable life. If you’re single, you’ll need about $450K–$500K to achieve that same comfort level. That’s not accounting for luxury expenses like extravagant travel or fancy dining—just a steady, comfortable life.
If you don’t actively manage your super throughout your working life, you could fall well short of these numbers. Women who have taken time off work, who have multiple super accounts, or who have changed jobs frequently (as I did!) are at risk of having much lower super savings when they retire.
Government Employees vs. Private Sector Workers
Government employees often have more generous super arrangements, which is fantastic. But for the average woman working in clerical, admin, or customer service roles, those kinds of benefits just aren’t available. It’s crucial to start managing your super from the very first pay cheque
Early Financial Lessons for Long-Term Wealth
Here’s the good news: it’s never too early to start planning for retirement, and the earlier you begin, the better.
Women who are taught from a young age to invest wisely, seek financial advice, and manage their super proactively are more likely to enjoy a comfortable retirement.
If you’re one of the lucky ones who learned these lessons from your parents or mentors, you’re already ahead of the game. Many young women, though, miss out on this education, especially when it comes to diversifying income streams. That was me.
Why Multiple Income Streams Matter
Relying solely on superannuation and savings may not be enough to guarantee a comfortable retirement. Especially if you’re renting, property prices and living costs can easily outstrip your super balance.
The key is to explore multiple income streams early.
Whether through investing, side businesses, or even starting a venture that could continue into retirement, having options will give you more financial freedom and less stress as you approach retirement.
Final Thoughts: Future-Proofing Your Finances
For women just starting out, superannuation might seem like something to worry about later. But the truth is, the earlier you engage with your super, the better your chances of a comfortable retirement.
And if you’re a woman in your 40s or beyond, it’s not too late either! I’ve helped women just like you find ways to make up for lost super, discover additional income streams, and build a more secure future.
Whether you’ve just started working or have been at it for years, the power to shape your financial future is in your hands.
Take control now and avoid the mistakes that can come back to haunt you later. You’ve got this!