Stepping up your super savings in the final years of work can deliver outsized returns.
A pre-retiree with $1 million in super can double the size of their nest egg in six years by remaining in the workforce, which would also lower the risk of outliving their savings and alleviate skill shortages.
The 10 top-performing conservative growth funds over the six years to 2021 produced returns between 9 and 10 per cent, according to ChantWest, which monitors fund performance. These funds typically have between 60 and 80 per cent invested in growth assets. The federal government is being lobbied to make it easier for older people on the age pension to continue working or re-enter the workforce.
Seniors, most of whom have only had mandatory superannuation contributions for a portion of their working lives, want more incentives to return to work, particularly if small super savings trap them into frugal lifestyles. Almost quarter of a million of this group have more than $500,000 in their super. There are also 11,000 Australians with more than $5 million in super, according to the Australian Superannuation Fund Association. About 80,000 people have more than $2 million in super, including 370 people aged under 30. There are 27 self-managed funds“But superannuation balances owned by most pre-retirees are simply not enough,” Dunnin adds.
“The point is that when you get close to retirement, your account balance is at a working-life high so the impact of compound interest, if the markets are smiling on you, is huge,” he says. Alternatively, some former senior managers are “taking a back seat” in a business as a consultant because “they want to work at a different pace”, he says.
But high effective tax rates on age pension payments and earnings discourage many older Australians from taking on part-time work, says Brendan Ryan, principal of Later Life Advice, a financial adviser specialising in retirement issues.
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