A concerning trend of financial disengagement among young Australians threatens to diminish retirement savings by hundreds of thousands of dollars, according to new research from AMP. The study reveals that approximately 25% of Australians have never actively managed their superannuation, while nearly half only review their retirement funds once or twice annually.
AMP’s Super Director of Growth and Customer Solutions, Julie Slapp, emphasizes that this passive approach represents a significant missed opportunity. “Simple actions like verifying fund details or consulting with providers can substantially enhance financial confidence and maximize the powerful effects of compound returns,” Slapp noted. Research demonstrates that contributing an additional $20 weekly could accumulate to approximately $98,000 over three decades through compounding—a concept that remains misunderstood by more than half of Australians under 40.
Financial experts warn that this hands-off mentality often results in individuals being placed into default superannuation funds that may not align with their long-term financial objectives. Terry Vogiatzis, Director of Omura Wealth Advisers, explains that default funds typically maintain conservative investment strategies that might inadequately leverage the advantage of extended investment horizons. “While counterintuitive to some, appropriate risk exposure becomes advantageous when investors have decades until retirement. Extended timeframes reduce the probability of negative returns while enhancing predictability of long-term gains,” Vogiatzis elaborated.
Default superannuation options typically balance growth assets (including shares and property) with defensive instruments (such as cash and bonds). However, younger investors with higher risk tolerance could potentially achieve superior returns through more aggressive growth strategies. Vogiatzis illustrated this using a scenario where a 35-year-old with $75,000 in superannuation contributing $12,000 annually would accumulate $2.4 million at a 7% annual return, but $4.1 million at a 9% return—a difference of $1.7 million.
The Association of Superannuation Funds of Australia recommends retirement savings targets of $690,000 for couples and $595,000 for singles to maintain comfortable living standards, assuming home ownership. These figures highlight the critical importance of early and engaged superannuation management for long-term financial security.
