Advice - How to save for retirement (25 y.o.)

[samlight]

Hi,

I was just looking for additional understanding and insight so I can prioritise my finances a bit better. I am a 25 y.o. and married (double income at the moment).

Currently my S.O. and I are putting away $100 a f/n for ETF investments (at this point in time, 35% Aus, 35% American, 30% Non-Amer). We want growth options that we don't have to watch the market for. We want to save for a home deposit. I just had a look at my super, and there is this little thought in the back of my mind that it won't be enough. I am currently making no additional super contributions, have it in a high-risk portfolio option and don't know anything about how super works except that I can't touch it till retirement and my employer has to make contributions.

I know that I can't put money into everything, just looking for some insight into how what I do now may change my outcomes in 30-40 years.

 

[resjudicata]

@samlight the best way to save for retirement is

1 - make sure you have a ppor that is fully paid off. this reduces the monthly budget as you don't need to factor in rent/mortgage payments ever again

2 - put as much money as you can afford and is allowed into super. the low tax environment will result in larger gains than anything held outside super.

if you can do the above, you'll be fine and any other assets you can build will be a bonus

 

[samlight]

@resjudicata How do you recommend balancing the payments for a ppor and extra contributions? Is there a limit to the contributions I can make? What do you mean by the low tax environment?

 

[resjudicata]

@samlight my personal view is: focus on the home first. i did it through cash as that's a guaranteed balance / return vs investing in the stock market.

once you have your home and enough emergency funds etc, then max out super up to 27.5k p.a. concessionally.

super is a low tax environment. income and short term gains are taxed at 15% and long term capital gains 10%. outside super, it's taxed at your marginal tax rate which could be up to 47%

 

[abexiii]

@resjudicata This is the way

 

[simplewoodencross]

@samlight Your etfs are unlikely to get you a home deposit. If you are first home buyers, look at FHSSS and maximise extra contributions into super to take advantage of the scheme.
You will need to save for the rest of the deposit in cash. There are various government schemes available that can help you get your first home.
A lot depends on the state you live in and your combined gross income

 

[samlight]

@simplewoodencross What is the benefit of saving for an ppor using your super? Is the interest generally higher than savings accounts?

 

[simplewoodencross]

@samlight You pay less on your income by making these payments to super. You might be on 32.5 cents bracket plus 2% Medicare levy. So you save 34.5% by paying into super. Just get advice on forms required

 

[losangl]

@simplewoodencross I thought it was a 15% tax on super contributions (pretty sure super isn't tax free haha) plus you can only withdraw 85% of pre-tax extra contributions for FHSS??

 

[diannna]

@samlight So if you don’t already, learn how compound interest works. You’ll find your expected super balance will be much more than you realise. You also need to account for the fact that your wages will grow over time naturally through standard wage growth and through your own volition with promotions etc.

Next, and this is just my approach. Get your PPOR asap. Then buy investment properties over the years using equity in your PPOR. Learn about how leveraged returns work and you’ll see that real estate investments will put you in good stead.