In the last decade, millennials’ share of superannuation fund balances have more than doubled to 14.6 per cent, according to Roy Morgan data. This means that millennials have the greatest growth potential as Baby Boomers start to cash out for retirement.
But is that a good thing?
Millennial control could be problematic
The time to get millennials thinking about their financial future is now.
Historically, it’s been relatively challenging to get younger generations to start thinking about superannuation. Industry Communications Director of Roy Morgan Research, Norman Morris went on to explain that the industry might be in for some uncertainty.
“The very low satisfaction levels among the younger generations of around [50 per cent] are likely to lead to low brand loyalty and engagement. Industry funds with their higher satisfaction levels should have a growth advantage over retail funds if this lead in satisfaction with performance can be maintained,” said Morris.
But in order to have a strong financial future, millennials need to start planning for their financial futures now. So why aren’t they more engaged?
The hesitancy to get into superannuation
Right now, millennials have shorter term priorities – they want their smashed avocado toast, and they want to save up for their first mortgage. Typically, this generation doesn’t start thinking about setting up their superannuation funds until after they’ve gotten their families started. However, this is too late, especially with the latest super changes from 2017.
For example, let’s say you are 24 years old earning $45,000 and hoping to retire at 67. If your current super balance is at zero, and you have an employer contribution of 9.5 percent, without making any contributions of your own (and with a medium fund fee level) you’ll have roughly $207,160 by the time you retire.
Not bad, is it? But get this – using the same criteria, someone starting just two years later at age 26 and with a salary of $47,000 will only receive $205,400 by the time they retire. Every year you wait, you are losing thousands of dollars!
So what can we do to get millennials interested in thinking about their financial future sooner? Well, for one, we can introduce them to the technology.
Super technology and the millennial
The superannuation industry uses highly advanced technology that allows the user to view live data with just the click of a button – and if there’s one thing we know about millennials, it’s that they love their gadgets. The platforms that superannuation advisors are using with their clients are helping to open up a dialogue and get people more invested in their investments.
Going over superannuation used to be considered a yearly chore, but now the technology keeps users up to date on the latest with their funds and the industry in general. It becomes more of an engaging strategy now, summarising the information all into one convenient place and with the ability to view on a smart phone. With this information readily available, it is the hope that millennials will become more engaged as they see that they don’t have to go out of their way at all to plan.
To learn more about how DFK Crosbie’s SMSF services can help you stay on top of your financial future, contact our team today.