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How Jessica saved an extra $135,000
Jessica’s strategy:She attends a super seminar on her 40th birthday and decides to start working towards her retirement goal gradually, with a regular salary sacrifice of 5% of her salary.James’ strategy:He contributes only the minimum 9% employer contribution and hopes this will be enough for retirement. Just before turning 65, James sees a financial planner and realises he needs the same amount that Jessica has saved in super in order to enjoy a comfortable retirement.Outcome:By age 65, while Jessica has only been contributing 5% more of her salary than James, her retirement savings are 38% ahead of James’. While Jessica has contributed $74,000* (net of tax) over 25 years in salary sacrifice contributions, her account balance is $135,000* higher than James’ thanks to the benefits of compound interest. In order to boost his super balance to enjoy the retirement he wants, James would need to make an after-tax contribution of $135,000* to his super just before he retires.James's Savings = $361,000 ; Jessica’s savings = $496,000* ($135,000 more than James) * figures are in today’s dollar term 
Assumptions: Average rate of investment return (net of tax and administration fees): 7% p.a.; Average rate of salary growth: 4% p.a. ; Average rate of inflation: 2.5% p.a.; Jessica’s savings assumed to be salary sacrifice. Jessica has to pay 15% contributions tax on the 5% ;of her pay that she salary sacrifices into super, resulting in a net amount of 4.25% of her pay ending up in her super account. ®Registered to BPAY Pty Ltd ABN 69 079 137 518 Published by BPAY Limited ABN 69 079 137 518 on behalf of member financial institutions. BPAY is offered by 180 financial institutions. Go to www.bpay.com.au for Members list. Contact your financial institution to see if it offers BPAY and to get the terms and conditions or Product Disclosure Statement (PDS). This is general advice - before using BPAY please review the PDS and consider whether BPAY is suitable for your personal circumstances.
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Achieve is issued by Russell Investment Management Limited (‘RIM’), ABN 53 068 338 974, AFSL 247185. Achieve provides general information only and does not have regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. The information has been compiled from sources considered to be reliable, but is not guaranteed. Past performance is not a reliable indicator of future performance. Total Risk Management Pty Ltd ABN 62 008 644 353, AFSL 238790 (‘TRM’) is the trustee of the Russell SuperSolution Master Trust ABN 89 384 753 567 (‘Russell SuperSolution’) and the issuer of the Product Disclosure Statement (‘PDS’) for Russell SuperSolution. Any potential investor should consider the latest PDS in deciding whether to acquire, or to continue to hold, an investment in Russell SuperSolution. The PDS is currently available by visiting www.russell.com.au or by phoning 1800 555 667. RIM and TRM are part of the Russell Investment Group (‘Russell’). Russell or its associates, officers or employees may have interests in the financial products referred to in this magazine by acting in various roles including broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell or its associates, officers or employees may buy or sell the financial products as principal or agent. You may contact Russell on (02) 9229 5111. MKT/1657/0308 |
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