How to make your super work for you

Estimated reading time
 5 min

In this article

• What superannuation is and how it works
• The average super balance in Australia
• Why you should care about your super

Superannuation is more than just a financial buzzword.

It can play a role in helping you retire comfortably and growing it while you’re young can make future-you feel financially secure. But if you feel like you’ve left it too late with your super, then there are still things you can do to turbocharge your super savings, such as changing your investment strategy or making voluntary contributions if you can.

If you’re not sure what superannuation is and how it all works, we’re covering the super basics so you can understand how to set yourself up for a financially comfortable future. Let’s go.

What is superannuation?

Simply put, super is a long-term investment that grows over time which you then cash out when you retire.

For a lot of us, investing in our superannuation starts when we work for an employer. Australian businesses are legally required to contribute a portion of your salary into your nominated super fund.

If this is your first job, your employer may have a default super fund they suggest, so it pays to do your homework to work out if that’s the best fund for you. But if you’ve been in the workforce for a while, you will have an existing super fund – so make sure to give those details to your new employer instead.

Your employer is required to pay a figure equal to 11.5% of your wage into your super fund, but this will bump up to 12% in 2025.^disclaimer

But you don’t need to rely on your employer’s contributions. You can add to your super fund too. However, there is a yearly cap on how much you can deposit (called a ‘contribution cap’).^disclaimer

How does superannuation work?

As we touched on before, your employer must pay a portion of your salary into your super fund, and you can contribute to it as well. So what happens to the money that’s in your account?

Well, your super fund will invest that money on your behalf, or hold it in cash, to grow and support you when you’re ready to retire from the workforce (and cash out your super). The best part is that you can change how your super fund invests your money based on what you need. For example, if you have ten or so years left before you retire, you might consider switching to a higher-risk investment option to boost your super.

At the end of the day, do what’s best for your future. You can always talk to a financial advisor or investment expert about the smartest approach for your circumstances.

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Why should you care about your super?

Your super is like your secret savings weapon. You might not notice the contributions that are made on your behalf now, but they can add up pretty quickly. If you and your super fund manage that money well, it can be your ticket to being financially ready for retirement.

The earlier you focus on your super, the bigger it can grow through compound interest, which is where you earn interest on your initial investment as well as future deposits. Plus, it can make your money snowball at a rapid pace over time.

What is the average superannuation balance in Australia?

Well, that depends on several factors. Your age, gender and work history all play a role in what the average super amount for your age group looks like. For example, the average amount of super for someone in their early-to-mid thirties is $38,386, but for someone in their mid-to-late fifties that figure is $180,689.

And while women tend to retire with less super than men, there are strategies they can follow to close the super gap. For instance, diversifying your investments might help your super work harder (and earn more money).

  Hot tip:

Want to see how much super you’ll have when you retire? Then you can use Moneysmart’s superannuation calculator to get an estimate of how much money you can access when you decide to retire.

Hyperbolic discounting plays a part too

Hyperbolic discounting is when we prioritise immediate rewards over long-term ones. In the case of superannuation, you might weigh up making additional voluntary contributions to your super or buying a shiny new car. If you buy the car because this purchase makes you feel good now, you could be shy a few extra thousand dollars when it comes to retirement time.

To reduce the impact of hyperbolic discounting, keep your retirement in the back of your mind when considering an immediate reward and think about how your decision will affect future-you. Also work out if you need the immediate reward. If you don’t, pop that money into your savings or super. If you do, investigate alternatives that will help you scratch that itch at a lower cost.

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