Home ownership leads to greater interest in superannuation

New home ownership and signing up for a new mortgage often leads Australians to start engaging more with their superannuation.

That’s one of the findings of new research by the University of Sydney Business School in association with the University of New South Wales, the University of Technology, Sydney, Colonial First State and the ARC Centre for Excellence in Population Ageing Research.

They found that people who took out a new home loan or looked for home ownership changed their super contribution behaviour both before and afterwards, compared with those who did not take out a mortgage.

Researcher Professor Susan Thorp of the University of Sydney Business School said while owner-occupiers often work on growing their super after buying their home, those taking out a mortgage to buy an investment property tended to regard real estate as their primary financial interest.

“The process of buying a home and home ownership forces people to evaluate their financial situation, including their superannuation, and this is a very good thing,” said Professor Thorp. “It often leads to good savings decisions and, therefore, better retirement outcomes.”

Australians have traditionally held a ‘set and forget’ attitude towards their super. And while this is changing as more people come to realise they can no longer rely on the aged pension to fund their retirement to the same extent as previous generations, levels of engagement are still concerningly low.

For example more than a third of Australians never open any emails or letters from their fund. And for younger people aged 18-34, that figure rises to over 50 per cent.

But when you consider that we’re typically talking about 9.5% of people’s income each year, the mistake of ignoring superannuation often turns out to be an expensive one in the long run. And for today’s younger generations, who tend to buy property later in life than their parents, waiting until they take out a home loan to begin paying attention to their retirement plans is simply not an option.

Investing some effort in establishing a simple retirement plan and then taking a little time each year to check its progress can mean the difference between a comfortable retirement or additional stress when you’re 50-something, and the balance in your super account suddenly becomes interesting.

Read financial planning for your life plan | Trilogy Funds Australia

For one thing, there’s the power of compounding: the more you contribute to your super earlier in your career, the more likely you are to achieve your retirement goals.

But numerous other issues also arise from not knowing where or how your super is invested, and not being engaged with your future retirement plans. These include:

  • Lost super – jobs which are held only for short periods of time often result in unclaimed super, especially if it is paid after you leave
  • Multiple fees – lost super can in turn result in fee duplication, costing you more in fees that you would pay if you managed all your super in one place.
  • Investment risk – where you invest your super for retirement is important. Not knowing where or how you are invested can impact your ability to achieve your retirement goals and reducing the benefits obtained from the power of compounding.
  • Tracking – if you don’t know where your super is invested, it’s virtually impossible to know whether you are on track to your retirement goals.

It’s never too early to begin thinking about your long-term investment goals. Knowing what you will need in retirement can help to understand what steps you might need to take today to secure your financial future. Test how much you really know about super or check out why we believe financial planning is essential for your life plan.

This article has been prepared by Trilogy Funds Management Limited (Trilogy) ABN 59 080 383 679 AFSL 261425. This advice is general advice only and does not consider your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances and we recommend that you seek personal financial product advice on your objectives, financial situation or needs and obtain and read the relevant product disclosure statement before making any investment decision.

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