If you have a 40-year savings goal, let’s say to become financially independent before you retire, you will spend the first 10-years covering 10% of the journey; the primary contributor to your portfolio, will be your own savings (e.g. super contributions). In fact, it will take 30-years just to get halfway, and it’s not until the last 10-years that the miracle of ‘compound interest’ will kick into gear. In that final quarter your portfolio will (should) double in size, and your annual investment returns should comfortably exceed your annual savings (contributions).  

It doesn’t matter whether you are paying off a home loan or saving for retirement, the first 10% is the hardest and takes the longest, and by comparison, the last 50% will seem like a walk in the park. You may get lucky, but 99% of us will have to do it the hard way, slowly at first, but accelerating as our savings grow. Or to put it another way, you need money to make money.  

So to the question: “When should you start to take superannuation seriously?” Well, for most full-time employees, somewhere between the age of 35 and 45. If by the age of 45 you haven’t discovered that you need to own productive assets (shares and / or property) to achieve financial independence, you will end up on the age pension, because cash is not the answer.  

Unfortunately, superannuation is complex. How much you can put in, when you can put it in, and whether you can claim a tax deduction, are not simple questions. What’s more, when can you retire, how much can you (should you) take, when can you take it, how is it taxed and what happens when you die, all have their own set of rules.    

There can also be plenty of complexity with investments. It’s easy to contribute to super and pay no attention to it, while it’s small, and you are working. But it’s a very different experience when you retire and are totally dependent on your savings to maintain your lifestyle and living standard. Like it or not, if you are financially independent, you effectively have to retire as your own ‘fund-manager’, and how you perform will depend, in no small way, on what you have learnt over the 40 years it took to become financially independent.

The formula is ‘simple’.

  • Keep a full-time job for 40 years, where your income keeps up with inflation.  
  • Contribute 12% of your income to super every year (e.g. employer SGC).  
  • Invest in a diversified portfolio earning a net 7% after tax and other costs, to achieve a ‘real’ rate of return, after inflation, of 4%. And  
  • You should have enough money to retire on, assuming the rules haven’t changed?

Is this possible? Well fortunately, to date, the answer has been yes. According to the ASFA stats1 on the Australian superannuation industry, the average annual return has been 7.3% or a real return after inflation of 4.5% over the last 30 years.

What’s more, the chart below shows the ASX 200 accumulation index (which includes share price growth + dividends but excludes franking credits) has achieved a 9.7%p.a. compound rate of return (the dotted line on the chart), to which you could add a further 1.3% p.a. for franking credits, a total pre-tax return of 11% over 30 years.

So it has been possible, and as long as Australia remains a great place to live, it will continue to be possible, to achieve a target rate of return of 4% plus inflation.  

In the current share market, I do have a small buy list, including companies like BHP and Sonic Healthcare, but right now, my focus is on ensuring all clients have enough cash to meet their short and medium-term goals, and otherwise just letting the market do its normal thing. Sometimes it is expensive and sometimes it is cheap, right now my guess is it is on the expensive side, so it is a good time to ask the question, do you have enough cash. Cash is good for liquidity and contingency, and it gives you the option to invest opportunistically, but it is not the answer. If you need cash, or don’t actually have much in reserve, now is a good time to top up the bank account, but I wouldn’t change your strategy or try to time the market.  

If you would like to discuss your portfolio and or retirement strategy, please call me directly on (07) 3334 4856.

Ken Howard CFA LLB B.Econ  

Authorised representative259290



  1. The ASFA (the Association of Superannuation Funds of Australia) statistics for September 2023, show the average 30 year super fund return is circa 7.3% or 4.5% after deducting inflation.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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