Few Aussies have enough super for a comfortable retirement: research

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The most important gap in Australia has nothing to do with healthcare.

It is the chasm between how much superannuation we have and how much the experts say we need for a ‘comfortable’ retirement.

Plug your date of birth into the Association of Superannuation Funds of Australia (ASFA) super balance detective and it will produce a number often much larger than your balance.

Canstar analysed the difference between the ideal amount and the amount the average Australian has in his or her account, and it’s likely to make for sobering reading for many.

“For every age group, the gap between the required balance for a comfortable retirement and the average balance is massive,” Canstar’s finance expert Steve Mickenbecker told news.com.au.

“For most groups they are only a third of the way there.”

The gap for 60-year-old men is, on average, $249,000. The average superannuation balance of this group is $180,944. ASFA says it should be $430,000. Women of the same age have an average balance of $154,896 and a gap of $275,000. This cohort did not have a super scheme for the first 10 years of their working lives.

“A 60-year-old with an average super balance now has little chance to catch up and the future looks likely to be a part pension initially and, eventually, a full pension and a significantly lower standard of living,” Mr Mickenbecker explained.

“A comfortable retirement means holidays and dining out, not yachts and fine wine, and the number assumes you’re living in your own home without a mortgage,” he said.

Younger Australians have the opportunity to close the gap, but must act promptly.

“The young can catch up, but it’s time to go into repair mode as soon as incomes are restored post-COVID-19,” he said.

“This means making extra salary sacrifices into superannuation during the years when they are also saving for a first home. Most times, home ownership comes first.”

Financial planner Nicola Beswick told The New Daily that planning for retirement was essential.

“Getting advice five years before you retire versus when you have retired can make quite a big difference,” she said.

“The amount of money you need is all relative to what you want to do, where you can get income from, and how comfortable you feel with depleting your wealth, or whether you want to have a legacy to pass on to someone.”

Being realistic about your expenditure is vital.

“A lot of people don’t actually realise how much they spend on just the day-to-day living,” she said.

“We kind of shy away from sitting down and doing a budget and being honest with ourselves around how much we are actually spending and what we are spending money on.”

ASFA’s retirement standards are $43,901 per year for a comfortable lifestyle for a single person and $27,987 for a modest lifestyle. For couples, the figures are $62,083 and $40,440.

YourLifeChoices’ expenditure estimates in retirement are more specific. The figures are provided from The Australia Institute after each quarter and relate to three cohorts of retirees – affluent, constrained and cash-strapped – for both couples and singles. Our latest annual expenditure estimates are as follows: affluent couple and single – $76,390 and $43,586; constrained couple and single – $43,972 and $24,313, and cash-strapped couple and single – $37,160 and $23,330.

The ASFA estimates that the lump sum needed at retirement to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single person. This assumes a partial Age Pension.

Financial planner Gianna Thomson told The New Daily that paying off your mortgage and not having large credit-card debts were important steps prior to retirement.

“People underestimate how much they need in retirement and how long it has to last,” she said.

It is more likely that we will live into our eighties these days, so someone retiring at 65 must be assured of incomes from superannuation, the Age Pension or investments such as shares or property.

Ms Thomson says it’s worth considering how much you will need to fund your retirement before agreeing to help children with expenses such as home deposits.

Money educator and finance expert Vanessa Stoykov told news.com.au that older Australians need to act fast.

Saving for the future comes down to “now versus later”.

“Do I want the money now or do I save for later?” she said.

Ms Stoykov suggested to check your superannuation balance regularly with a super fund app.

“The more power people take into their super the better,” she said.

“Take care of yourself and don’t expect the government can.”

Are you resigned to a sizeable gap between what you need in retirement and what you have? Have you sought financial advice or wish you had in the lead-up to retirement?

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Written by Will Brodie

13 Comments

Total Comments: 13
  1. 1
    2

    What if you were born before 1954? It seems that you are already considered disposable. Maybe it is because most of us who were born before 1954 could never have amassed the minimum retirement funds legally.

    It’s like this stupid plan to draw down on the value of your home. All this comes down to is a government betting that by the time people realize they have no home, and no funds to live on, it will be someone else’s problem. Just like the politicians who stole the OAP funds to balance their dodgy book-keeping.

    If we took the max out of our home, and live for another 15 to 20 years, it would only give us an extra 10.5K per year, which added to the current OAP puts us below the minimum. And then we’re betting that we die before we run out of drawn-down. What a load of nasty people we have in Government. Their pension is tied to their last earnings and indexed, but no talk of reducing this.

  2. 0
    2

    Would not the early release of super as allowed by the Morrison government cause the gap to increase. I guess some Liberal supporters would not agree with this comment.

    • 1
      0

      This is what made that proposal so controversial. There was much talk about Government expenditure being a burden to later generations whereas this early release of super funds will impose a burden on tax payers down the track. It would be so bad it there wasn’t evidence of wrongdoing by some.

    • 1
      0

      no right answers here – it depends on how effectively the money is spent and what happens in the property or stock markets. If the money is the difference between owning a home rather than renting at retirement age then it’s a good thing, but it’s a risk that might be work out for some though not for all.

  3. 1
    1

    We (my wife and I) did all we could during our working lives to pay off our debts, our children’s uni fees, our mortgage, managed our living expenses, had few holidays, didn’t divorce or separate and saved where we could. Now we are both in our mid to late seventies. We get a part pension, have a reasonable amount in super and get a regular income that just meets expenses. So you would think, what are they bitching about? The problem is, though we are much better off than most aged people we had two major catastrophic upsets we had no idea would hit us. One was when my wife suddenenly became incapacitated and needed aged care for the rest of her life (Effective cost some $52,000 per annum and not including regular medical costs) and secondly, because we worked our guts out, the savings we managed to accumulate drastically reduced our part pension (deemed assets rates bull from DHS).
    Luckily, we employed a very well rounded, caring and educated financial planner who steered us through the CentreLink maze of benefits and deeming rates, often designed to cancel each other out and you end up with bugger all pension.
    On reflection, did we do the right thing? Should we have worked so hard? Why are we in the mid range of pensioner incomes? We now have little prospect of a comfortable and varied retirement, and the only way to enjoy the fruits of our labour is to plan to exist on minimum income for the next 10 years or so, or till we die.
    Neither of us has been near any beach in the past three years, not even a visit. That gives you some idea of how frugal we have become just to exist. A “fair go” we are told comes to those who “give a go”. Another PM super hype from Australia’s leading bullshit salesman. It didn’t work for us!

  4. 0
    2

    These ‘experts’ all seem to think money supply is not unlimited & it must grows on trees when we are raising families (school/uni/sporting fees, etc etc), paying mortgages & keeping old cars running (& need rego’s insurances & fuel as well as fixing break downs) – or trying to buy a new one/s if you are really wealthy/lucky, maintaining equipment (like household furmiture, washing machines, fridges, etc & having to do maintainance on said house & household equipment (hot water services dont go forever, spouting needs replacing, electrical wiring needs fixing, rooves replacing, plumbing, etc all COSTS MONEY…LOTS OF MONEY!! Oh & did I mention the mortgage to buy said house after marriage break up & paying out a partner- x 2 for me!!
    How are we meant to afford to put ‘enough’ super away for a rainy day/old age wit all this crap going on for the last 50 or 60 yrs before we actually think about retiring?? So much for education, these experts seem to have no idea, if they think we should be able to self fund our retirement rather than rely on govt assistance at some stage!

    • 4
      1

      It is not the role of the government of any hue to pay for life’s ups and downs. There are literally millions of people who have raised families, got divorced (even multiple times), lost jobs, got sick and any other normal facts of life. The government is not there to insulate anyone from any of this. We all have personal responsibility and we all make choices and live with the consequences.
      The only role for the government is to provide a safety net for those who cannot fend for themselves (not those who choose not to fend for themselves). We as a society have expectations that the vulnerable will be looked after and to a large extent they are, we do have health care for all, there an aged pension (among a raft of other handouts people can apply for) plus a range of other supplements. Could these be at a higher rate? Maybe. But ultimately it was and remains up to the individual to provide for their future.

  5. 1
    2

    I object to the Aged Pension being described as a handout. The real handouts are the tax breaks those with very large balances in their super that in the not too distant future will cost the government more per annum than the aged pension.

  6. 2
    0

    I think that the following question needs to be answered before proceeding. What is “comfortable”? That word means so many things to so many people. It also depends on your lifestyle, how many people are involved in your retirement and the extent of where one wants to travel. If a couple has $300,000 in super, they will be able to access about $1000pw as well as having discounts on electricity, rates, water rates, telephone, car registration and licence fees if you live in NSW. I consider that amount as “comfortable” but others may need more or less than that to make the same statement.

    • 1
      0

      On ASFA site they quantify what they mean by modest and comfortable lifestyles.

    • 2
      0

      I understand that McDaddy, but that’s what they think is “comfortable” and that is merely an opinion. You and I also have opinions which may or may not agree with ASFA and who is to say that their opinion is the right one. I know my opinion is right for me and will certainly not be right for most others and I would be arrogant to even suggest that.

    • 2
      0

      I think their comfortable figures are far too high. We’ve been spending around $38K for the last two years and feels very comfortable. Live in the country and drive 8 hours to see family numerous times a year so petrol is costly but we could give up some things and have an even lower expenditure. Still have full hospital private cover for example.

      Helps that we don’t eat out, drink, smoke or take expensive holidays.


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