Millennials in our current age are faced with many pressures and challenges. In a world where the price of housing and avocados continue to rise, there is no reprieve for the millennial trying to have a fair go. House ownership has always been a ubiquitous cultural value in Australian society. The ‘Australian Dream’ or the ‘Great Australian Dream’ has been the mainstay of generations of Australian men and women. Sadly this reality has changed.
In an article published by the Sydney Morning Herald the combination of low interest rates, growing population numbers and lack of housing supply are marked as being just some of the reasons why house ownership is a ceasing option for many Australians. The article prompts the question of what a financial ‘Plan B’ might look like. While there are many viable alternatives, superannuation is one that is mentioned and deserves a better look at in light of the current economic climate.
Three reasons for using superannuation as an alternative ‘Plan B’:
1. Tax Benefits
The first major advantage to using Superannuation as a Plan B is to take advantage of the tax benefits that exist. Superannuation paid by your employer is a before tax arrangement and so using Salary Sacrifice can allow you to save more money in the long term by paying lower amounts of tax. Salary sacrifice is a good way of reducing marginal tax rates, especially when we might be just above the tax bracket below us. For more information the ASIC MoneySmart website outlines in detail the difference between investing in super and property.
2. Earn interest rather than paying interest
Secondly, superannuation allows for you to earn interest on your money rather than paying interest on a mortgage. Considering the current climate of housing, with house prices so high the average mortgage will require a long term commitment in which interest works against you. Super allows you to start putting away small amounts at a much younger age without being a great burden on your after tax income.
3. More flexibility
The cultural differences and practical realities of growing up in a different generation will see changed cultures and values. While owning a house was the marker of success for many in the generations before, the way our cities work demand younger people to be flexible and have the ability to move in light of working and social demands.
While Superannuation may not be the best Plan B for all, it is worth considering if it is right for you. At Christian Super our goal is to help our members to live life with financial health and understanding. We would love to help you consider what your options are and get you advice on what’s best for you. Why not call us on 1300 360 907 or contact us here!
General Disclaimer – The content of this article includes advice that is general in nature and does not consider your personal situation. Christian Super encourages all people considering their options in retirement planning to seek out qualified professionals who can provide specific personal advice.