It seems unnecessary to think about making additional contributions into super when you’re so far away from retirement. However, contributing to your super from an early age is how you can reap the benefits of compound earnings – basically, the longer your money is invested, the more it can grow.

What is compounding?

Compounding is the concept of adding accumulated returns back to your account, so any earnings on your super are added to your balance on a regular basis to generate more returns. So not only does your initial investment have earnings added to it, you get earnings on your earnings!

If you’d like to learn more (in a general sense) about the effects of compounding, when investing, visit Fido to use their Savings Investment Calculator. Take care to read the background assumptions. In the case of super investments, the results of compounding will be affected by a range of factors including tax, fees and costs.

The scary news ...

Research suggests that a couple will need approximately $50,000 p.a. to enjoy a comfortable lifestyle in retirement. That sounds like a lot doesn’t it? Especially, if your 9% Superannuation Guarantee (SG) Contribution is the only contribution being made to your super.

The good news ...

The sooner you make additional contributions to your super, the sooner you can take advantage of the benefits of compounding. There are lots of different types of additional contributions you can make. You’ll need to work out how much you can afford to put into super on top of your employer’s 9% SG contribution.

The affect of any additional contributions you make will depend on your own circumstances. However to illustrate possible outcomes, based on some assumptions, here’s two examples:

If you invested $1,000 a year for 40 years then you could have $161,924 in your super account at the end of that period, based on a 7% earning and 15% super contribution tax.

Whereas, if you didn’t start making additional contributions to your super until you were in your 40s and doubled your contribution to $2,000 a year, then after 20 years (based on the same assumptions about earnings and tax), you would only end up with $77,531 in your account.

Of course, it’s impossible to predict the future (and assumptions can change or turn out to be wrong) but adding to your super savings may be the only way to secure a better retirement for yourself. Visit our Help Centre to learn more about the types of contributions that can help you increase your retirement savings.

Bonus - if you make an after-tax contribution

We’ve got some good news about your super that we think you should know. You could be eligible to receive a Government Co-Contribution into your super from the Federal Government of up to $1,000 (subject to some eligibility criteria).