The difference extra contributions can make

Contributing extra to your super does not have to be a big financial obligation.

By making small, frequent contributions to you super over the long-term you can make a real difference to your retirement savings. And the earlier you start, the better off you will be.

The impact of voluntary contributions

 Brad age 33 Brad's story in the table below shows the difference voluntary contributions of just $50 a week could make. This is the cost of a basic meal out with your spouse or buying your lunch each day at work - but it could give you up to almost $7,500 more income in every year of your retirement.

33-year-old Brad is single and has already accumulated $45,000 in super. He plans to retire at age 60 and expects his retirement income will last until he is 87. Brad's annual salary is $65,000.

  Annual savings until retirement Estimated funds
at age 60		 Estimated annual retirement income in today's dollars
9% SG Contribution only $4,972 $765,880 $18,508
9% SG Contribution + $100 post-tax contributions per fortnight $7,572 $1,029,125 $24,870
9% SG contribution + salary sacrifice to reduce take-home pay by $100 per fortnight $8,203 $1,092,912 $26,411
Assumptions
Future performance is not guaranteed. These figures are projections and are not a guarantee of return.

By making extra contributions to his super, Brad could boost his annual retirement income by $6,300-$7,900 pa - a difference of up to $150 a week.

You might not be able to afford to contribute $100 per fortnight but even $20, $30 or $40 can make a significant difference. Find out how extra contributions can boost your super with the Telstra Super Simulator.

It pays to start early

It has been calculated that 78%* of the average super balance at retirement is made up of investment earnings. This is because of the power of compound interest - where you earn interest on your interest on your interest over time. So, the sooner you start contributing extra to your super, the greater your final balance is likely to be.

Fiona, Craig and Toby's experience below illustrates this point - an overall $116,028 difference! Even though Craig contributes $48,000 more and Toby an additional $76,000, Fiona ends up with a higher balance by contributing at a younger age and tapping into the power of compound interest.

  Fiona Craig Toby
Age they start voluntary contributions to super 21 31 41 
Voluntary contribution $2,000 pa
for 10 years		 $2,000 pa
for 34 years		 $4,000 pa
for 24 years
Total voluntary contribution $20,000 $68,000 $96,000
Estimated balance at age 65 $295,025 $274,474 $248,996
Assumptions
Future performance is not guaranteed. These figures are projections and are not a guarantee of return.
*Chessell, Dr. David, Director, Access Economics, 2006, Is superannuation the 800 pound gorilla of the Australian investment markets?, paper presented to ANU College of Business & Economics and CBE Alumni Network, 30 Oct 2006.
Contribution limits

Starting early with your additional contributions is even more beneficial given that contribution limits apply to pre-tax and post-tax contributions.

Contribution limits restrict the amount by which people can boost their super with larger contributions closer to retirement.

There are tax benefits too

For most people, contributing to super is a tax-effective investment, with returns taxed at a maximum of 15%. Compare this to paying tax at your marginal rate (up to 45% plus Medicare levy) on investments outside of super.

You can choose to contribute on a pre-tax basis, which depending on your income tax rate and personal circumstances could also provide significant tax advantages. Alternatively, if you earn under $61,920 pa and contribute post-tax contributions to your super, you may be eligible for a Government co-contribution of up to $1,000.

Choosing between pre-tax and post-tax contributions can be confusing, so we have prepared some information on pre and post-tax contributions.

 Use our Pre-tax vs Post-tax contributions calculator to find out what type of contributions will work for you.

To explore all the options available to you, you can consider visiting a financial planner from Telstra Super Financial Planning. You can make an appointment by calling 1300 033 166 or request an appointment online.