Save more tomorrow – the clever strategy to significantly improve your retirement savings.

We all want to have a financially comfortable retirement.  In Australia we are blessed with an excellent superannuation system.  However most of us know that the 9.5% of our wages that our employer puts into super will not be enough to provide for the sort of retirement we would like, especially as we live longer.

It is one thing to know that we really should be putting a little more into super, but it is an altogether different thing to actually do something about it.  Putting more into super now, means less in your pocket to spend today.  And whilst you know it is wise for the long term, that doesn’t help you pay the bills or plan your next holiday.

Recognising this disconnect between the desire and intention to save more, with the reality that for most it simply doesn’t happen, behavioural economist Richard Thaler (Nudge – Improving decisions about health, wealth and happiness), proposed a solution known as Save More Tomorrow.

The idea is that we make arrangements for future pay rises, or perhaps some portion there-of, to go to retirement savings.  In Australia for employed people that would mean salary sacrificing to superannuation.  In this way, your take home pay doesn’t decline – a key dis-incentive for people participating in voluntary savings.


Let’s take a look at the impact.  Assume a 30 year old, with $50,000 currently in super, earning $80,000pa, and with super earning 7%pa.

Scenario 1 – At next pay rise, salary sacrifice 2% of pay to super, and leave that run for the rest of working life.
Impact – retirement savings improved by $265,992 at age 65.

Scenario 2 – as per scenario 1, but repeat the following year, so that from that point, salary sacrificing 4%pa through to age 65.
Impact – retirement savings improved by $518,290 at age 65.

A very meaningful impact without reducing your take home pay.


This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. Contribution limits apply to superannuation and the penalties for exceeding these limits are considerable. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.