In today's fast-paced world, millennials, (born between 1981 and 1995) face unique financial challenges and opportunities. One of the most powerful tools at their disposal is the Self-Managed Superannuation Fund (SMSF). While the idea of managing your own retirement fund may seem daunting, it's a path worth exploring. Given the potential benefits it offers, it’s never too early to take greater control over your financial future.
Australia is often referred to as the "Lucky Country," and there's a good reason for it. According to Andrew McKie, Portfolio Manager at Elston Investment Management, Australia's superannuation system is poised to make it the wealthiest nation in the world on a per capita basis. This wealth-building potential is particularly promising for millennials. The cornerstone of this wealth-building machine is the Superannuation Guarantee Levy, which requires employers to contribute a portion of their employees' salaries into their superannuation accounts. This means that millennials are accumulating retirement savings from the very beginning of their careers.
Millennials have the advantage of time on their side when it comes to investing. The longer your money is invested, the more time it has to grow through the power of compounding. This is where SMSFs come into play – they allow you to take control of your investments, potentially maximizing your returns over the long term, likely outpacing larger funds. Moreover, millennials are known for their long life expectancies, which is excellent news for their retirement planning. With potentially several decades of retirement ahead, it's crucial to ensure that their superannuation funds will last. SMSFs provide the flexibility to tailor investment strategies that align with their long-term goals.
Further, many millennials are part of or transitioning into dual-income households, which means they have the capacity to contribute more to their superannuation accounts. SMSFs allow both partners to actively manage and invest their retirement savings, potentially leading to even greater wealth accumulation.
Research from Vanguard and Investment trends also shows SMSF trustees are getting younger, and have been for several years. The average age of a trustee fell from 48 to 46 years in 2021. Vanguard says SMSFs are "no longer just the realm of older investors." Those aged 35 to 44 years were the most active age group in setting up new SMSFs during the June quarter 2021, accounting for 34.3 per cent of new funds, according to June quarter 2021 ATO data.
Thus, Andrew McKie's sentiment rings true – for millennials, superannuation is somewhat of a ‘modern-day millionaire factory’. By taking control of their superannuation through SMSFs, millennials can harness the full potential of their retirement savings.
If this resonates with you, exploring the full breadth of your future financial options is a great place to get started. Get in touch if you would like to chat further.
Kylie Harding is an Investment Adviser who believes in free access to information about building financial literacy at every stage in life has the potential to empower women and inspire economies.
Contact Kylie today on [email protected] or 02 9998 4206.
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