The significance of today’s contributions on your retirement savings
We all know the power of compound interest over time. It makes sense that your retirement savings will benefit from contributing as much as possible, as early as possible and on a regular basis.
To draw attention to the importance of how much we save before retirement, I wanted to highlight the Russell 10/30/60 Retirement Rule*. It concludes that the sources of your investment earnings during retirement can look approximately like this:
- 10% from money you saved during your working years
- 30% from the growth of your savings before you retired
- 60% from growth that occurs during your retirement years.
Isn’t that amazing! It means that a small contribution today can grow to have a significant impact on your final retirement savings. It also shows you that as much as 60% of your investment earnings could come from portfolio growth after retirement.
At Russell we’re dedicated to helping you prepare for a healthy retirement. We also want to make managing your super as easy as possible.
So we’ve come up with the key areas you can address to maximise the amount of money you save during your working years. You need to:
- Establish a regular contribution plan using different types of contributions, such as salary sacrifice and the Government co-contribution
- Have the appropriate investment mix leading up to and in retirement
- Have one super fund
- Have enough insurance cover
- If you’re over 40 – assess your retirement options.
I hope this edition helps you ask the right questions and find the answers you need to get on track with your retirement goals and set your super up to generate a strong and steady cash flow for the rest of your life.
More information on Russell’s 10/30/60 Retirement Rule
Chris Corneil
Managing Director, Australia and New Zealand
Russell Investments
*Bob Collie and Matt Smith. “The 10/30/60 Rule: Where do Defined Contribution (DC) Plan Benefits Come From? It’s Not Where You Think.” Russell DC Insights, January 2008