I got a message from a colleague on Slack the other day:
“Just read this and instantly thought of you…”
You just know at that point, either it’s going to be good news or, well, it won’t be flattering.
In this case, thankfully, the message was followed by:
“The fact that it struck a chord must mean I’m learning from all that Foolish wisdom!!”
Bullet. Dodged.
And gave me a great opportunity to share the following with you.
See, the line he highlighted came from a story in The Australian:
“McKell Institute executive director Michael Buckland said using the early super access scheme to get quick money when the pandemic hit was “worse than using a payday lender”.”
Buckland isn’t wrong.
And he went on to explain:
“$4.7 billion dollars that could have been invested in the retirement savings of thousands of Australians has gone missing,” Mr Buckland said.
“If you took out the maximum $20,000 you were allowed to, then that’s cost you $3600 so far. Of course that loss only compounds over time.
“Of all the many ways the government could have helped people get through 2020, this had to be among the most costly.
“Instead of using its own borrowing capacity to help people, the government forced desperate citizens to miss out on an investment windfall they would otherwise be enjoying now.”
I hope, dear reader, those sentiments sound familiar.
It was the very same argument I was running during the worst of the pandemic, when the government encouraged us to raid our retirement savings.
First: It’s terrible financial advice. Unless you really, really need it, stopping compounding dead in its tracks will cost you a small fortune in retirement.
And the younger you are, the more it’ll cost you, because you had longer to compound the money if you’d left it alone.
Second, as Buckland points out, it was remarkably irresponsible from a government that was already spending more than $100 billion anyway, and could borrow at a tiny interest rate to help out those who genuinely needed it.
It was, in a word, atrocious.
And, because politics is notoriously short term and retirement savings the ultimate in long-term thinking, by the time those chickens come home to roost, the current Parliament will be a distant memory.
I called it #retirementwrecker.
I railed against it in my articles, emails and on social media.
I railed against it on television.
I hope you saw.
I hope you paid attention.
I hope you held the line.
I heard from some of you who did.
I heard from one bloke who, as a caring employer, took the time to let his staff know just what the cost might be. It wasn’t financial advice, of course, but he’s done those employees a greater favour than they’ll realise, perhaps for decades.
One of my favourite quotes is an old Greek proverb:
“A society grows great when old men [and women] plant trees in whose shade they know they shall never sit.”
Perhaps it is also true that a society grows weaker when old men and women encourage you to cut down young trees and use them for firewood, when better, cheaper sources were otherwise available.
No, that won’t fit on a t-shirt, but you know it’s true.
(As an analogy it fits more than just this example, too, by the way. But that’s for another day. Or over a beer.)
The lesson from Michael Buckland, and from me, is simple.
Compounding works.
And it is summarised beautifully by no less than Warren Buffett’s right hand man, Charlie Munger:
“The first rule of compounding: Never interrupt it unnecessarily.”
Was it necessary for some people, given the circumstances?
Unfortunately, because the government chose not to support them, yes.
Was it necessary for many, many others?
Nope. Not even close.
Some did it because they didn’t know the implications. Or couldn’t resist the temptation.
Or because a bird in the hand might be worth two in the bush.
But Super was potentially offering 3, 5, or 10 birds in future, depending how old you are.
That’s compounding.
And that’s the tragedy of the whole thing.
A quick public service announcement: We’ve just unveiled a new weekly video series on YouTube. It’s called — accurately, if somewhat unimaginatively — Stock Of The Week.
Hosted by yours truly, and featuring some of The Motley Fool’s crack investing team, each week we’ll cover a current Buy recommendation from one (or more) of our services.
The aim is to give you a look at a company we like, while also helping you learn a little more about how we invest.
Click here to watch the very first one, released yesterday.
And don’t forget to like the video, subscribe to our channel, and hit the ‘notification’ bell to be alerted when we publish more content to the channel!
Okay, back to my email…
Now, if you avoided the temptation and/or didn’t end up in dire circumstances, congratulations on both your discipline and knowledge, and your luck.
If you didn’t, I want to create a sense of urgency for you.
You have potentially, by choice or necessity, significantly dented your retirement nest egg.
But what’s done is done.
What matters is what happens from here.
And this is where it starts to apply to all of us — whether you used the Super Early Access program, or not.
Because a dollar saved today has the same potential future yearly gain for all of us.
We don’t all have the same number of years to retirement. Or in retirement.
But money saved, and invested, today, is likely, if history is any guide, to be worth more in a few years’ time.
And potentially more a few years after that.
And more again, after more years.
Yes, you could spend that dollar today.
Or you could save and invest it, and have potentially many more dollars in the future.
Yes, I know you know that.
But — and this is the tough love part — most people reading this aren’t doing enough about it.
Some are doing nothing at all.
So, let me ask you:
Do you really need that shiny new toy?
The new threads?
The night out?
Am I being a killjoy?
You bet I am. And I’m not even sorry.
But not entirely.
All work and no play makes Scott a dull boy.
It’s probably the same for you, too.
I’m not saying live a life of poverty.
You don’t have to join a convent or a monastery.
Just make sure you’re putting enough away for tomorrow. And that goes doubly if you’ve raided your Super, savings or both over the last 15 months.
I hope, at a societal level, we have lots of old people planting trees for future generations.
But in the meantime, don’t end up relying on the kindness of strangers.
Make sure you’re planting enough trees of your own.
Fool on!
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