Superannuation has dominated headlines again this week — and for once, it's good news.
After months of uncertainty, the Treasurer confirmed he would reverse parts of the proposed higher taxes on large super balances, a move many feared would undermine confidence in the system. As Motley Fool's Scott Phillips put it, "common sense has prevailed."
That decision matters not just for those with multimillion-dollar accounts, but for every Australian still building their nest egg. It's a reminder that while policy may shift, the fundamental advantage of super — tax-effective, long-term compounding — remains one of the most powerful wealth-building tools we have.
And for 45-year-olds and younger, there's still a lot of time for that compounding to work wonders.
The Rule of 72: Compounding in motion
The Rule of 72 gives a simple way to understand how compounding builds wealth: divide 72 by your annual rate of return to estimate how long it takes to double your money.
At an average 9.3% return, your balance doubles roughly every 7.7 years.
Over 20 years, that means about 2.6 doublings — or a 6.5x increase from growth alone.
Now layer in ongoing employer contributions. On a $100,000 salary package, the standard 12% super contribution adds $12,000 a year. That steady inflow invested and compounded can push the total growth to around 9x to 10x by age 65.
So, even without extraordinary luck or timing, average market returns and consistent contributions can transform today's balance into genuine financial independence.
Why a small boost in returns changes everything
A 1–2% difference in annual performance may not sound like much, but over 20 years, it can change everything.
- At 10% per year, money doubles roughly every 7.2 years.
- At 11%, every 6.5 years.
That means instead of your balance growing 8×, it could grow 12× or more, potentially turning $250,000 into over $3 million.
You don't need to take reckless risks to achieve it. The difference often comes from:
- Ensuring your superannuation is tilted towards growth when there is a long time before income is needed.
- Staying invested through market cycles.
- Avoiding unnecessary fund switching.
- Watching and managing (i.e. avoiding unnecessary) fees.
Those tiny edges compound quietly, year after year.
Adding rocket fuel
Super already benefits from the 12% employer contribution, but you can accelerate the process by adding just a little more.
A 3% voluntary salary sacrifice — about $250 a month on a $100,000 salary — could add $150,000 to $200,000 more by retirement. That's a modest lifestyle change today for a major lifestyle upgrade later.
And as your career progresses, each pay rise increases your contributions automatically. A move from $100,000 to $120,000 adds an extra $2,400 in super each year, which compounds into hundreds of thousands more by 65.
Don't forget life outside of super
Super is an excellent long-term vehicle, but it comes with caps and access restrictions. Once you're nearing the concessional cap or want more flexibility, start building an outside investment portfolio — through quality ASX and/or global shares, ETFs, or other assets.
It's a smart way to stay invested and maintain liquidity before preservation age. Think of it as your freedom fund — complementing, not replacing, superannuation.
Foolish Takeaway
At 45, you still have time for a powerful 20-year compounding sprint.
A slightly higher return, a few extra contributions, and a commitment to keep investing can turn the average balance into a multi-million-dollar portfolio.
The magic isn't in the markets. It's in time, consistency, and giving your money every chance to compound uninterrupted.
