Wealth ManagementSuperannuation and SMSF

Superannuation strategies: The key to building wealth across generations

Matthew Swieconek
7 May 2024
8 min read

Is having the right superannuation strategy still considered the cornerstone of wealth-building and retirement planning? Or is that all in the past?

The answer is simple: with the cost-of-living crisis looming, the importance of superannuation has become more crucial than ever before.

As Australians grapple with rising living expenses, stagnant wages, and an uncertain economic outlook, superannuation continues to offer a tax-effective way to save for retirement by providing a steady stream of income in later years.

Adopting effective superannuation strategies for your particular life stage can secure your financial future, create a legacy for your children and grandchildren, and still allow for your immediate financial needs.

In this article, we explore the key superannuation strategies outlined in the Superannuation and Retirement Insights Report, that can help you build wealth across generations. 

Understanding superannuation across generations

The way each generation in Australia understands superannuation and its benefits differs greatly, but what’s important is that we all accept that it is an important and effective means to a secure retirement.

The different life stages for each generation call for different superannuation priorities:

  • Baby Boomers (born pre-1964): Often hold a more passive approach, having benefited from a strong job market and having the longest access to compulsory contributions. They may prioritise capital preservation and income generation in their investment choices.

  • Generation X (born 1964-1980): Juggling higher living costs and stagnant wages, Gen X might feel less confident about their retirement security. They may be more risk-averse and seek a balance between growth and stability in their super investments.

  • Millennials (born 1981-1996): Entering the workforce during the Global Financial Crisis, Millennials are often burdened with student debt and face a volatile job market. They may prioritise responsible investing and seek growth opportunities, despite a higher risk tolerance.

  • Generation Z (born post-1997): Just starting their careers, Gen Z is digitally savvy and information hungry. They may be interested in innovative investment options and prioritise sustainability factors in their super choices.

These different age groups have varying levels of awareness and attitudes towards superannuation, which are influenced by factors such as upbringing, economic conditions, and financial education. For instance, younger generations like Gen Z may prioritise saving for retirement at a higher rate compared to older generations, reflecting a shift towards individual responsibility for retirement planning. 

In our Superannuation and Retirement Insights Report, we uncovered a fascinating trend: the investment preferences of various age groups wield significant influence over superannuation strategies and eventual outcomes.

For the younger crowd, it's all about seizing the moment and aiming high with more aggressive investment choices, geared towards maximising long-term growth potential. On the flip side, older generations often prefer to safeguard their hard-earned wealth through more conservative approaches, prioritising stability over potential gains.

The generational differences in investment styles have the following consequences:

  • Missed opportunities: Conservative strategies may limit long-term returns for older generations.

  • Knowledge gap: Millennials and Gen Z may benefit from financial education to make informed investment decisions.

  • Tailored products: The superannuation industry can develop products catering to specific risk appetites and life stages. 

Maximising superannuation for each generation

Maximising superannuation for each generation requires strategies that cater to the unique needs and circumstances of the different age groups. 

Superannuation strategy for Gen Z

For Gen Z, it is crucial to:

  • Initiate contributions to super as soon as possible to leverage compounding interest

  • Explore growth-focused investment options within superannuation to align with a longer investment timeline.

  • Take an interest in your superannuation and investment opportunities. Websites like Young Money can provide financial education and utilising budgeting and investment tracking apps can enhance financial literacy.

Superannuation strategy for millennials

For millennials, it is crucial to:

  • Increase super contributions in line with income growth, leveraging growth strategies to maximise long-term savings and compound interest benefits and take advantage of employer-matching programs.

  • Balance debt and super savings. For example, investigating alternative homeownership strategies such as rent-vesting while focusing on debt management and increasing super contributions.

  • Focus on building a diversified investment portfolio, considering risk tolerance and long-term goals

Superannuation strategy for Gen Xers

Gen Xers may have competing financial priorities such as raising children and paying off mortgages. They should aim to balance short-term financial needs with long-term retirement goals. This may involve:

  • Contributing a portion of pre-tax salary to super for tax benefits and accelerated savings.

  • Minimise fees by consolidating multiple super accounts into a single, low-cost fund.

  • Seek professional advice to refine superannuation strategies, focusing on investment selection, tax planning, retirement income streams, and estate planning to ensure a secure financial future.

Superannuation strategy for Baby Boomers

Baby boomers who are closer to retirement age, should focus on preserving their accumulated wealth and ensuring a comfortable retirement. They may consider:

  • Utilising the "catch-up" contribution scheme to boost super balance before retirement and consider downsizing to ensure a more comfortable position during retirement.

  • Develop a sustainable retirement income plan with a financial adviser, optimising income streams and managing estate planning for efficient superannuation distribution.

  • Consider healthcare costs in retirement planning, including insurance, long-term care, and government support, for financial stability.

Superannuation legislation changes

Legislative changes on superannuation have significant implications for different age groups, particularly in terms of contribution rules, investment options, and retirement income.

For younger generations, the removal of the $450 monthly earnings threshold for super contributions is a positive change, as it ensures that employers are required to pay the Superannuation Guarantee on the wages of employees earning less than $450 per month. This change can help young workers build their retirement savings from an earlier age.

For those in their peak earning years, the introduction of a $1.6 million superannuation transfer balance cap and the reform of the taxation of concessional superannuation contributions can impact their retirement savings. These changes aim to improve the fairness, sustainability, and integrity of the superannuation system, but they may require individuals to adjust their retirement planning strategies accordingly.

For retirees, the abolition of the work test for retirees and the expansion of the Downsizer Scheme can provide greater flexibility and opportunities for contributing to superannuation. The eligibility age for the Downsizer Scheme was lowered from 60 to 55 years on 1 January 2023, allowing eligible people who sell their home to make a one-off, $300,000 contribution to their super, outside the concessional and other rules.

The role of financial advice in superannuation management

Unlocking the power of financial guidance in superannuation management can be a game-changer across life's diverse stages. From fine-tuning super contributions to crafting savvy investment strategies, it's about more than just numbers—it's about empowering individuals to navigate crucial financial crossroads with confidence.

Whether it's mapping out the present, planning for retirement, or embracing the unknown of tomorrow, accessing financial advice can pave the way to a secure and fulfilling financial future.

A financial advisor can help:

  1. Young workers navigate the complexities of superannuation and maximise their long-term savings potential. 

  2. Those approaching retirement ensure that their superannuation savings are invested in the most appropriate way to meet their retirement goals. 

According to the Superannuation and Retirement Insights Report, individuals who receive financial advice are more likely to engage with their superannuation and have higher levels of confidence in their retirement planning. 

Take control, secure your future with superannuation

Superannuation is a powerful tool for building wealth across generations. By understanding the generational nuances, implementing actionable strategies, and seeking professional guidance when needed, you can unlock its full potential in every stage of your life.

Key Takeaways:

  • Superannuation is for everyone: Each generation can benefit from a tailored super strategy and with the right strategy you can balance immediate financial needs and future security.

  • Start early and engage actively: The power of compound interest and informed decisions is significant and the more you engage and contribute, the greater your retirement funds.

  • Financial literacy is key: Educate yourself and seek professional advice to navigate the super landscape. Understanding how superannuation works and how to optimise your contributions can lead to substantial growth before retirement.

  • Legislative changes matter: Stay informed to maximise the benefits of evolving super regulations.

Every generation can take control of their financial future today by utilising the information and strategies outlined above to make informed superannuation and retirement decisions.

To delve deeper and gain personalised insights, register for our upcoming webinar: Navigating superannuation in a cost-of-living crisis on Wednesday, 15 May. We'll have financial planning and wealth-building experts discuss generation-specific super strategies and answer your burning questions. Don't miss this opportunity to take charge of your superannuation journey.


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Author: Matthew Swieconek | Head of Investment Relations