In the recent eBay advertisement, Mr King wrote:
“You are bidding on a unique never before seen opportunity to purchase my Super when I retire at BC 3065 years old.
“How it works: whatever the final bid is at the end of this auction is, I will double it and you will be entitled to the money when I retire. For example: If the winning bid is say $10,000 you will get $20,000 when I retire at 65. It’s that simple.”
Is the deal worth it?
The problem is, it’s a pretty dud deal!
A far more simple option for investors might be to invest that potentially winning bid into their own superannuation fund; unlike buying something on eBay, there are significant tax advantages for most workers in paying money into their own super fund – particularly if the money is contributed as a salary sacrifice.
|Marginal tax rate||Superannuation tax rate||Tax saving|
So for someone on the average income tax rate of 32.5%, for example, a $10,000 salary sacrifice into superannuation can net a tax saving of around $1,750. And once the money is in your fund, savvy investors should very easily expect to more than double the amount over a thirty-four year period.
Comparing a $50,000 winning bid on eBay with a $50,000 personal (after tax) contribution into your own superannuation fund, CANSTAR calculates the following outcomes at a modest earning rate of 6% net per annum:
|eBay bid||Personal super contribution|
|Net earnings per annum||N/A||6%|
|Balance after 34 years||$100,000||$271,307|
Source: CANSTAR. Assumes superannuation earnings rate of 6% per annum, net of fees, taxed at 15%.
Of course the final outcome will depend on the average yearly return and the fees charged by your individual super fund, but perhaps the most important part of the eBay advertisement is to act as a wake-up call for the many workers who take little or no interest in the performance of their super fund! So for readers of the original story thinking: ‘hey, doubling my money sounds good’, the message is look after your current super fund and try some online calculators to work out just how much you could potentially end up with at retirement. You might get a nice surprise!