Federal Budget 2024
15/05/2024
Investment Education Bonds
21/05/2024
There’s a cognitive bias that affects all people, but particularly those of younger generations.
It’s called ‘hyperbolic discounting’ and means that the further off into the future a particular reward is, the more we discount the value of that reward in our mind.
Superannuation is a perfect example of this phenomenon.
Under current superannuation rules, we can make up to $27,500 each financial year in ‘concessional contributions’ (FY24) and are taxed at the ultra-low rate of just 15%. By contrast, if that same money was paid into our bank account, it would be taxed at up to 45% (plus Medicare levy).
So why don’t more people in their 30s and 40s make extra payments into super to take advantage of this incredible tax break?
Cognitive discounting.
If you spend that money today, you get immediate gratification. But if you invest that money into super, you can’t touch it for another three decades. By then, those extra concessional contributions would’ve compounded into an enormous sum of money – but that’s hard for most people to wrap their heads around. That’s how the human mind works.
One of the roles of a financial advisor is to alert clients to these kinds of biases and crunch the numbers so they can make informed decisions. Spend money today…. or much, much more in the future.
Keen to find out what the numbers would look like for you? Let’s discuss it.
This is general advice only. Please speak to a licensed professional for personal advice related to your specific situation. If you want expert advice on achieving your goals, speak to Affinity Private Advisors today by calling 1300 769 304, emailing enquiries@affinityprivate.com.au or filling in this online form.
The information contained in this article is current as at 23/04/2024. Any advice or information contained in this report is limited to General Advice for Wholesale clients only.
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