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$100k earners can reach $1.6m in super
Superannuation fund members who earn $100,000 can save at least $1.6 million in super irrespective of the proposed changes, according to Rice Warner.
This was the conclusion in an analysis by the research house that assumed the individuals starting voluntary savings was from age 40 that earned at least $100,000, and based on assumptions including an annual (long-term) fund earning rate of six per cent and wage inflation of 3.5 per cent.
"All fund members are able to reach the prescribed $1.6 million cap. However, in order to do this with conservative earnings, the member must fully utilise their concessional contribution allowance and make non-concessional contributions which range from $4,000 per annum to $19,000 per annum depending on their current financial situation," the analysis said.
"Members with low balances who leave saving in superannuation to much later in life (say post 50) will struggle to accumulate a balance of $1.6 million by retirement.
"The modelling shows that irrespective of the proposed changes each of the fund members can save at least $1.6 million in superannuation — bringing contributions forward makes this much easier, given the Government's proposed cap on amounts transferrable to a pension account."
The analysis noted that if a member was able to make a significant once-off non-concessional contribution in the immediate term this could reduce their total non-concession burden by over 25 per cent.
"Clearly, the most effective approach is to start saving early and to let compound interest do the rest of the heavy lifting to get to $1.6 million," it said.
"For, example a 25-year-old with no balance would only need concessional contributions of $20,300 p.a. in order to achieve a balance at retirement of $1.6 million. Of course, this is out of reach for many but those with very high incomes would be able to achieve it."
Rice Warner noted that this disciplined savings regime was beyond the ability of more than 90 per cent of the population.
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If you're 50, in this scenario, with the new contribution caps, you will need to work to 100 to hit $1.6 million. Unfortunately you still won't be able to contribute past age 75 under the new changes. Epic fail.
The new figures from Rice Warner are very different from the incorrect ones they issued a month ago. Now they say that a 40-y-o with a $200k super balance (much higher than the community average) earning $100k p.a. (much higher than the community average) will need to contribute $32.2k into super every year until 67 to reach $1.6m. That's some savings habit!
Yes Trevor, the Rice Warner people must be spending a lot of time around rich overpaid Union bosses who can afford such high annual super contributions. But if you're poor, but a fortunate to receive a lotto winning or an inheritance, you are denied the opportunity to put that much of that [if any] into your super fund.