It's never too early, or too late, to think about how adding to your superannuation might improve your retirement goals.
For the purposes of this article, we'll look at what putting an extra $10,000 into superannuation in 2024 could be worth when the time comes to hang up your hat and kick up your feet.
Now, much of that is going to depend on your current age. And we'll work with the assumption that you were born from 1957 onwards, meaning you'll be 67 before you retire.
Depending on your super balance at that stage, you may be eligible for a full pension, part pension, or none at all, providing you've managed to grow your retirement nest egg to a sustainable size.
We won't make any assumptions here about how large your overall superannuation pool will be at retirement. We'll just look at the potential benefits off adding in that extra $10,000 this year.
How much could this help your final superannuation balance?
Now, aside from how much time you've got left before retirement, there's another big variable at play here.
Namely, the kind of returns you can expect from your superannuation fund.
For a better idea of that, we turn to KPMG's Super Insights 2024 report.
According to the report, "With global financial market growth, Australian superannuation funds posted strong investment returns. Average returns were 8.62% for the year FY 2023."
This saw the total super assets under management in Australia grow to more than $3.5 trillion.
And the good news is that management fees, which can take a big bite out of your final nest egg, have been coming down.
According to KPMG, "Amid strong competition between super funds to attract and retain members, average fees continue to decline." A positive trend the report says is likely to continue.
I should note, however, that the strong FY 2023 result came after most super funds posted losses in FY 2022.
Taking a longer-term perspective, the average return of Australian superannuation funds over the past 20 years sits at around 6.5%.
So, working with the 6.5% annual returns, if you were to add $10,000 to your superannuation in 2024 and aimed to retire in 10 years, that extra investment would be worth $19,122.
That's already almost double in just 10 years.
However, by tapping into the magic of compounding, younger workers could do far better.
If you're 47 and looking to retire in 20 years, that same $10,000 could balloon into $36,564.
And if you're 27 and not aiming to retire for 40 years, adding $10,000 to your superannuation balance in 2024 could give you an extra $133,696 to enjoy in your golden years.
