Would you let someone select your first car to buy or indeed even a house? Interestingly, that is exactly what some people are doing with their retirement savings.
A recent report released by REST superannuation said that about 1/3 of all people aged between 18-30 years old don’t open their superannuation statements or know what to do with them.
Lethargy is probably the underlying cause of most of these respondents acting in such a way but the reality is that such as a strategy can be a very costly one to the person over the longer term. Here are some reasons why;
- Albert Einstein said that compound interest was the greatest discovery of all time. Therefore just by earning 1% per annum more be it through tax savings or investment earnings can result in a difference of tens of thousands of dollars over 30 years.
- Many people are eligible to be given $500 from the government by following a simple strategy.
- Superannuation is not a product but a tax structure. We are basically given two choices by our government we can hold assets in a taxable environment or a non-taxable environment. Many people are unwittingly selecting the former environment and then complain about paying too much tax and not having enough resources to retire on.
- Many people don’t like renting a house as they see it as dead money and being at the whim of a landlord. However, it is exactly this approach that these people are taking to their retirement savings by not having control and letting other people decide how their money will be utilised.
- Superannuation provides a great mechanism for younger people to deal with their estate planning matters such as making sure their families are looked after in the event of death or sickness. In most cases this is instead of not dealing with the issues.
In this respect take control of your own destiny and follow the advice of Albert Einstein and make sure you are taking advantage of compounding by having the correct strategy from day 1.
I would encourage you to go and seek professional advice as there are a whole raft of things that need to be considered and you need to build up a relationship with a professional with whom you can trust. Importantly, there are two main ways to describe those that give financial advice that is aligned to a product provider or those that are Non Aligned. I would suggest the later but that is not to say the advice from the former cannot be good but as a consumer you just need to be aware of any limitations under which they might be acting.
Written by Robert Coyte, Shartru Wealth Management Pty Ltd. ABN 46 158 536 871 AFSL 422409 The advice is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstances