|
|
Fast start
|
|
When it comes to super, time can be your best friend. While taking advantage of a fast start strategy might not be an option for all of us, it could make a big difference to your kids.
So how does strategy #5 work?
- Well, first, a few key facts about super, which are important to the fast start strategy.
- Anyone under 65 can make personal contributions to a super fund.
- To be eligible for the government contribution and take advantage of a fast start strategy, you have to be working (even part-time) and submit an annual tax return.
- For part-time workers, compulsory super does not kick in until you are over 18 and earning more than $450 per calendar month.
- So, whether you kick start your teenager into action or do it for them, from the day they start their first part-time job, get them investing just $20 a week from their after-tax pay into super.
- Assuming they do not earn more than $28,980 a year, this $20 a week after tax investment means they qualify for the maximum government co-contribution. So for every $20 they put into super (up to a maximum of $1,000 per annum), the government puts in a further $30 (up to a maximum of $1,500 per annum).
- Doing this for four years, effectively making a personal contribution to super of $1,040 a year, could make a difference of $82,000 to their super balance at a retirement age of 60.
This strategy works well for any teenager working part-time. The only tricky bit is getting them to start saving!
The AMP ad provides a worked example of how much difference using a fast start strategy can make to your child’s end super balance over his or her working life.
It's built on comparing the impact on the end super balance of one person, if they chose to make no voluntary contributions to super while working part-time versus employing an AMP fast start strategy while working part-time from ages 16 to 20. Full details and assumptions are as follows:
Details and assumptions |
|
Starting age: 16
Employment status: part-time employment 16 - 19, full-time employment 20 - 60
Salary: age 16 - 19 < $28,980. Age 20 - 60: based on average weekly earnings as defined by the Australian Bureau of Statistics data
Return of 4.74% p.a. used, after fees, tax and inflation. The fees are based on average AMP retail fees from Flexible Lifetime Super and inflation is modelled at 2.5% p.a.
|
Without fast start strategy |
With fast start strategy |
Super contributions:
Age 16 - 19: no contributions to super during part-time employment
Age 20 - 60: 9% compulsory contributions only once working full-time
|
Super contributions:
Age 16 - 19: $20 a week contribution during part-time employment - giving a total personal contribution of $1,040 p.a. and qualifying for maximum government co-contribution of $1,500 p.a.
Age 20 - 60: 9% compulsory contributions only once working full-time
|
Super balance at retirement: age 60 $500,000 |
Super balance at retirement: age 60 $582,000 |
Difference the fast start strategy makes over working life: $82,000 |
All details and assumptions have been verified by Rice Warner actuaries, an independent third party.
|
What you need to know
Any advice on this page is provided by AMP Superannuation Limited, ABN 31 008 414 104, AFSL No. 233060, RSE Licence No. L0000550.
The advice is not based on your personal objectives, financial situation or needs. Accordingly you should consider how appropriate the advice is to those objectives, financial situation and needs before acting on the advice and, before buying any financial product, you should read the current customer brochure or product disclosure statement.
We are part of the AMP Group of companies. However, no remuneration or financial benefits are paid to us or our related companies or associates in relation to the advice provided on this page.
|
|
