Birthdays call for an extra slice

Super is served a treat at key birthdays, but savers shouldn’t blow out all their other candles, writes Anthony Keane

SAVERS are making changes to their superannuation investments long before they near retirement, and milestone birthdays such as turning 40 and 50 can affect their decisions.

A new paper by the CSIROMonash University Superannuation Research Cluster has examined the role of milestone birthdays in people’s decisions, and found that extra super contributions and investment mix changes tend to spike around these important dates.

“For contributions there is some evidence of increased change activity preceding the 40th birthday,” it says.

However, men and women act differently at 50. Men are more likely to make investment changes within five years of turning 50, while women take more action in their 50th year.

The research examined data from 120,000 super fund members.

“The odds that a member makes an investment change increases with age,” it says.

It found milestone birthday effects on investing were not as strong as those found in separate medical research, where people with a “nine-ending age” such as 49 or 59 were more likely to seek extramarital affairs, enrol in a marathon race for the first time or contemplate the meaning of life.

Previous superannuation research has found that super fund members significantly lower their exposure to shares at age 50 and 55.

However, today’s increasing longevity means someone in their 50s may still live for another 40-plus years, which means cutting exposure to growth assets such as shares and property runs the risk of running out of money sooner.

Tania Tonkin, a director and financial adviser at dmca advisory, said there was little reason to pull back on growth assets in super at age 50, given there was still a decade before the money could be accessed.

“If you pull back on the growth aspect, all you are relying on is the income,” she said.

Incomes paid by conservative investments such as shares and bonds have dropped dramatically in recent years as global interest rates remain low.

Ms Tonkin said people should consider making extra super contributions earlier in life.

“Often people focus on the family and mortgage payments, and don’t think about adding extra into super until around 50,” she said.

“If you start at 40, even with just a small amount, it can make a world of difference.”