6 ways young investors can boost their superannuation

Young Australians' investment preferences are influencing their superannuation strategies and outcomes.

Bronwyn Allen ❯

Bronwyn has 25 years of experience in journalism, copywriting, and media relations. She began her career as a reporter with News Corporation in Sydney in 1997. She later worked for two real estate corporations in communications and PR roles, then started her own freelance copywriting and publicity business. A keen shares investor, Bronwyn joined the Motley Fool Australia team as a copy editor and writer in June 2021.

Published May 15, 2024 3:30 am AEST

Superannuation is not high on the list of priorities for young investors, according to a new survey by financial advisory company, Findex.

Young Australians appear not to consider superannuation that important, with just 22% of Millennials and 13% of Gen Zs rating it a key wealth-building investment, says Findex.

Instead, the majority of young investors favour bank savings.

In addition, Gen Zs are the least likely to know their superannuation balances to the nearest $1,000, with 26% having a vague idea and 22% having no idea.

Among Millennials, 23% have a vague idea and 6% have no idea of their superannuation balances.

Knowledge of superannuation varies across life stages

Findex Head of Investment Relations Matthew Swieconek says the way each generation understands superannuation and its benefits differs significantly.

He says different life stages call for different superannuation priorities.

In terms of Millennials, who were born between 1981 and 1995, Swieconek said:

Entering the workforce during the Global Financial Crisis, Millennials are often burdened with student debt and face a volatile job market. They may prioritise responsible investing and seek growth opportunities, despite a higher risk tolerance.

In terms of Gen Z Australians, who were born between 1996 and 2010, he said:

Just starting their careers, Gen Z is digitally savvy and information hungry. They may be interested in innovative investment options and prioritise sustainability factors in their super choices.

Swieconek said the investing preferences of various age groups will influence their superannuation strategies and outcomes.

He commented:

For the younger crowd, it's all about seizing the moment and aiming high with more aggressive investment choices, geared towards maximising long-term growth potential.

On the flip side, older generations often prefer to safeguard their hard-earned wealth through more conservative approaches, prioritising stability over potential gains.

How much money do you need in retirement?

As we've recently covered, Australians tend to overestimate how much money they need in retirement.

The Association of Super Funds of Australia's Retirement Standard says couples aged 65 to 84 need $690,000 in superannuation, and singles need $595,000 by retirement age (that's 67).

On top of that, they need a part pension, and altogether, that's enough to fund a comfortable lifestyle costing an estimated $72,000 per annum for couples and $51,000 for singles.

For a 'modest retirement', both singles and couples need $100,000 in superannuation and a part pension to cover living expenses of about $47,000 for couples and $33,000 for singles.

The Association's estimates assume retirees own their own homes without a mortgage and draw down all their super, invest it, and receive a 6% annual return.

Introduced in 1992, superannuation is the primary savings vehicle for retirement in Australia.

Millennials and Gen Zs will be the first generations to receive mandatory employer superannuation contributions throughout their entire working lives.

The mandatory contribution rate has increased from 3% in 1992 to 11% today.