It can be difficult to think about retirement savings when you're in your 20's. Retirement seems a very long way away!
Most people in this age bracket are scrambling madly to get together a deposit for a home or savings for holiday, but here are some numbers that Gen Y should take note of.

A 25-year-old on a salary of $50,000 with a $5000 superannuation balance would have a balance of $358,394 at age 65 in today's dollars. If that 25-year-old salary sacrifices just an extra $20 a week, that balance would grow to $422,242 according to the MoneySmart superannuation calculator. That's almost $70,000 for just over $40,000 laid out in pre-tax dollars.



With those numbers as a reference, here are four reasons Gen Y should pay attention to their super:

1. The magic of compound interest and salary sacrificing. 

Albert Einstein called it "magic" but compound interest is just the basic premise that the longer you have money saved, it doesn't matter how small that amount is, the more interest it will collect. For example $1000 earning just 4.5 per cent will grow to $1480.24 in 10 years and if you add $520 a year, or just $10 a week, you would have $7973.15 at the end of the same period. The ability to salary sacrifice up to a cap of $25,000 (including the superannuation guarantee) for most superannuants, means that you have pre-tax dollars working for you too.

2. The benefits of consolidating accounts.

Another area Gen Y needs to be diligent in is the monitoring of the number of their super funds. No one wants a myriad of tiny accounts across a range of different funds, dating back to their very first part time jobs. Each employer you work for may have a preferred fund, but if you exercise your choice and remain with the same fund your retirement savings have a much better chance of growing. This is because fees have a bigger impact on the smaller balances. A balance of $500 minus a flat annual fee of $50, has got a better chance of growing than five different balances of $100 with the same flat fee taken out of each of them.

3. Gen Ys are in a good position to take advantage of the Government Co-Contribution.

Under this scheme, for after-tax contributions you make of up to $1000 a year, the government will match every dollar with a 50¢ contribution for those on salaries up to $31,920. For salaries between that amount and $46,920 the amount matched is gradually scaled back. This means that for someone earning up to $31,920, an amount of $500 will be added to their super fund by the government if a $1,000 personal contribution is made.

4. Asset allocation.

Gen Y has a unique opportunity to invest in higher growth assets like shares, as they don't need to be so concerned about conserving capital. Because they have time on their side, they can afford to be quite aggressive with their investment choices. With the help of compounding, this can literally make thousands of dollars difference at retirement.

If you fall into the Gen Y category or know any family members who do, please don't hesitate to contact Dominique Schuh on 07 5480 4877 or dominique.schuh@schuhgroup.com.au for an obligation free consultation.