Super's still super

Paul Clitheroe
Paul Clitheroe

In the last few decades the nature of retirement has changed radically. It's no longer seen as the beginning of our twilight years, but rather a fresh start. 

Financial security plays a key role in a quality retirement, and when it comes to laying foundations for our senior years, I reckon superannuation is still a super investment.

The beauty of super is that we generally can't access it until we retire. That makes it an ultra long term investment that benefits from compounding returns accumulating over several decades.

Around 80 per cent of Australian workers invest in a 'balanced' super fund, which invests across a range of asset markets including shares. In recent years balanced funds have taken a hit from by volatile sharemarkets, however research group SuperRatings found that in seven out of the last ten years, the average balanced fund has recorded positive returns. Over an entire working career, any negative returns on your super during bad years should be more than outweighed by the gains during the good years.

One of the chief drawcards of super is that it is extremely tax friendly. Contributions are lightly taxed, or not taxed at all if they are made from your after tax wages. The returns earned on the fund's investments are concessionally taxed, and from age 60 we can expect to access our super tax free.

It all points to super being a very useful investment.  The big question is whether you will have enough to fund a decent retirement.

Exactly how much you need depends on what you want to do when you retire. The latest (December 2011) figures from the Association of Superannuation Funds of Australia (ASFA) estimate that a couple looking to have what it considers a 'comfortable' retirement would need to spend about $55,000 a year. Those seeking a 'modest' retirement lifestyle need to spend close to $32,000 a year.

This may sound like a lot but with plans in place, and a healthy dose of dedication, you can accumulate enough super to live your retirement dreams.

The key is to take action early. Remember, super is a very long term investment and any extra contributions you make today will benefit from compounding returns over time.

There is a variety of ways to add to your super. You can salary sacrifice contributions by asking your employer to pay part of your wage or salary into your super fund instead of receiving the money as take-home wages. Or you can make a contribution from your own wallet, and if you earn less than $62,000 a year, the government will tip a bit extra into your fund tax free through the co-contribution scheme.

If you are approaching retirement it's essential to make the most of your super - and other assets, to maximise your retirement income.  This is an area where I recommend getting some professional financial planning advice. As a handy starting point, take a look at my eBook - "Top ten tips to making the most of your retirement". It offers sensible ideas for anyone in or near retirement, and you can download it for free from

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit for more information.

Topics:  paul clitheroe retirement superannuation

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