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The growth in superannuation savings through Super Guarantee legislation has countered the growing inequality in wealth (but not income) between 1986 and 1998 according to a paper by Simon Kelly from the National Centre for Social and Economic Modelling at the University of Canberra.

Kelly found that super forms 22% of the wealth of the average family and 73% of the wealth of the poorest two fifths. For the poorer families, super sometimes represents almost all their wealth.

Super is of particular significance for female-headed families, with the ratio of those with coverage rising from 20% in 1986 to 66% in 1998.

The paper concluded that while the rich are getting richer, the poor are not getting poorer - they couldn't because they didn't have anything to start with. However, the achievement of super for almost all employees means that while concentration of certain types of wealth has increased, overall wealth inequality has not.

Source: The above information has been drawn from the ACTU website

Perhaps the most difficult thing to do with Super in Australia is figure out what impact additional contributions will make when the age pension in considered. A person who ends up with around $200,000 won't be much worse off than the person who ends up with around $400,000 by making additional contributions (in today's dollars). However once you no longer have access to the aged pension, additonal contributions make a big difference. Many people can't see themselves even saving $200,000 dollars however with the impact of compound interest you may be surprised how fast your money will grow in the final years before retirement. Don't forget that Super receives concessional tax treatment. You also have the option to make pre-tax contributions through salary sacrifice.

Although there are some good internet savings calculators (try the ones on the First State Super site) what we need are calculators that show how much we need to contribute when the impact of current social security and tax rules are considered. 

Information in this article is not financial advice.

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