How working an extra 10 years can double your super balance


My parents retired not so long ago but that doesn't mean their lives have slowed down. Like many Australians at this stage of life, they haven't thought of retirement as an 'end goal' but rather a new beginning, a time to pursue ambitions, to learn, grow and explore.

Thanks to medical advances, many of us have better health and more time to look forward to in our later years. In fact, a 50-year-old Australian man can expect to live for another 33.2 years, while an Australian woman of that age can expect to live for another 36.6 years, Australian Bureau of Statistics data shows.

Superannuation has been another game-changer. The super system turns 30 this year and with three-decades worth of savings behind them, many Australians approaching retirement have accumulated meaningful amounts of money in their accounts. Even a small amount of superannuation savings gives people the flexibility to make choices about their future.

double super by working an extra 10 years colonial first state super research

What people are doing with this time and flexibility is rewriting the traditional narrative of retirement. While travel, friendships and family are still high priorities, many people have a strong desire for personal fulfilment - particularly when it comes to their careers.

Passion, balance and purpose

In May, Colonial First State surveyed 1000 Australians aged 45 to 65 years about their hopes and plans for their future.

The Unleash Your Second Half research revealed that more than one in three people are planning to change careers in the next few years - with a further 25% saying they might consider it.

The top two reasons people gave for pursuing a career change were to seek work they were more passionate about (36%) and to shift to part-time work to improve their work-life balance (31%).

Anecdotally, we know that Australians are increasingly prepared to change their work patterns if they can pursue more enjoyable work and achieve a better work-life balance.

The research confirms that given the right opportunities, 46% of people would work up to 10 years longer in a new career, while a significant 11.4% would work more than 10 years longer.

Remaining in the workforce allows people to maintain social connections, stay mentally active and, importantly, maintain a sense of purpose.

A super boost to the finances

There are obvious financial benefits to working longer, but many people would be surprised at just how significant the effect can be on a person's superannuation savings.

Additional modelling by CFS found that by working longer in a new role, people can double the amount of super they will have by age 75 - even if they take time off to retrain.

We compared the earnings and savings trajectories of three 50-year-olds with an average annual salary of $91,000, with the same super savings of $150,000, who took different paths towards retirement - let's call them Miles, Brooklyn and Katy for this example.

Miles follows a 'traditional retirement' path and stops work at age 65. Brooklyn and Katy take two years off to retrain before re-entering the workforce in revitalised careers, Brooklyn working full time and Katy working three days a week.

Miles would have $359,950 in his super fund when he retires at age 65. He would then start drawing income from his super, depleting his savings to $301,783 by age 70 and to $252,961 by age 75.

Brooklyn re-enters full-time work on a slightly higher salary and works an extra 10 years after age 65. He would retire with $555,895 at age 75 - that's $302,935 more than Miles.

Even if Brooklyn decides to retire at age 70 instead, he would have $451,322 in his superannuation account, which would reduce to $378,477 by age 75 - still $125,516 ahead of Miles.

Katy, like Brooklyn, takes two years off to retrain before re-entering the workforce. Her new career does not bring a pay rise, and she decides to work part time. Even so, she will retire with $403,715 in super at age 75 - which is $150,754 more than Miles has at the same age.

Money and confidence

Having money in super helps give people greater confidence and flexibility to pursue their ambitions.

For example, if Katy needs additional cash flow to supplement her part-time income, she could consider accessing her super via a transition to retirement pension after she reaches preservation age (generally age 60). This would reduce her final super balance, but it would also allow her to follow her aspirations without affecting her broader lifestyle.

There are many aspects and issues to consider when approaching the second half of your life. Professional financial advisers are equipped to help you make the most of your own personal circumstances. With attitudes changing towards what it means to retire, Australians have an opportunity to prepare to thrive in their second half, and on their own terms.

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Kelly Power is chief executive officer of Colonial First State Superannuation and has been with the company since 2018. Prior to joining Colonial First State, she was the head of platforms at BT Financial Group. Kelly held a number of other executive management roles at BT. She holds a Bachelor in Communications from UTS, a Diploma of Management from the Australian Institute of Management, a Diploma of Financial Services from Integratec and has also completed the Company Directors course at the Australian Institute of Company Directors.