It is not foreign for people my age to invest in themselves. Even though I am highly optimistic about the future, when it came time to think about education and career opportunities, much thought and hard work went in to getting it right. As much as travel and overseas living has broadened my outlook on the world in which I live, the hard work was always present. Despite what my parents would have me believe, I didn’t really grow up with a computer in my hand like my Son has and I have had my share of challenges with technology, but I understand its power to change what we can achieve with our lives. I am genuinely excited about the future because of what science and technology can do and I see my industry as no exception.
Since starting work, Superannuation has been part of the background noise of my life. It has sat, simmered, slipped and waned in my conscious. It hasn’t been a major priority with all the other things going on around me, kids, mortgage, business, school fees and more…. Since I have been engaged in this industry my perception has changed. I understand that super is real money, to be respected, grown, shaped and enjoyed. I am no longer cynical about the reasons for it or about the industry that looks after it. I don’t take risks with my super as much as I probably should, but then again it’s my money so why not be cautious? I have been reading between the government lines and it is clear my old aged pension will either be NIL or so low that it couldn’t support my weekends little alone my weekdays.
Where I have sat for the past ten years, I have seen successful professional people struggle to put together a valuable nest egg while others with more to lose, succeed in amassing large amounts of money for their retirement. One thing that I have come to understand from the many SMSF’s that have crossed my desk is that not one experience is the same. If you are looking for a fairy tale story, it rarely happens, sure one or two people have found stock that has hit pay dirt but it’s a miracle and the chances are as likely as winning lotto.
This experience has also shown me that investing in what you know and is close to your heart is important and pays dividends. You have to take an interest to succeed. You can outsource expertise and leverage your time, but you can’t outsource understanding. It should not consume your life but you have to put in some time to take a stake in your future. You don’t have to be a master of everything but you should grow your expertise and understanding in specific areas. I am not talking about hobbies or playing with money but a serious expectation that super will be the vehicle to carry you through your retirement years. People that understand and have integrated super into their financial plans seem to be more successful and make better overall decisions than those that are disengaged with super and feel they have other investments that will see them through.
Having an SMSF gives people the empowerment they need to push their learning forward. They have a reason to take notice as it becomes real to them. There will be ups and downs over the journey but it is essential that the quicker you get serious and hit the ground running, the better off you will be. If you want to leave your Super to the last minute and build your wealth outside of Super, there are things that I think you need to consider.
Superannuation as it currently stands is taxed at a concessional rate of 15% which is low in comparison to the higher marginal rates of tax for individuals and companies. If your investments go well while you are accumulating wealth, your Superannuation will pay the bill. This is not the case for you outside of Superannuation. Depending on your other income, tax could be up to 46.5%. If you sell down assets in pension phase your SMSF will not pay tax on any capital gains.
There are limits on how much you can put into super each year because the tax savings are so attractive. If you think that you can make your fortune outside of super and put it all into super all at once to get the tax benefits, you are wrong. It doesn’t work like that. The system is now designed to moderate contributions along the way which means you have to start early. You will still have the ability to put some handy chunks into your super from time to time, but planning to back load your super when you get closer to retirement can get tricky, especially if you want to put the kind of money into it that provides sustainable incomes for a long time.
Raising of the superannuation guarantee is an outstanding opportunity for you to take note of your superannuation and consider why you need to super charge it by getting involved now. The increasing rate of your super contributed by your employer will provide more for your retirement, but only if other factors, such as rate of return, fees and the length of time invested are all aligned to reach your retirement goals.
For me there is only one financial strategy decision to make, transfer the investment opportunities out there to my super today and build it so that I can enjoy the tax benefits now and maximise my savings for the future.