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How much super will you need to retire?

HOW MUCH SUPER WILL YOU NEED TO RETIRE?

HOW much super will provide for a “comfortable” retirement?

The Federal Government’s Retirement Income Review Consultation Paper released recently indicated Australians do not actively engage in their long-term retirement planning or their superannuation. The key reason for this? The complexity of the system.

Franklin Templeton undertook their own survey sampling the attitudes and behaviours of 2000 Australians over the age of 18 towards planning for and living in retirement. Their survey confirmed that despite our “healthy” compulsory superannuation system, the topic of retirement savings is increasingly becoming a driver of anxiety and distress for Australians, who are largely attempting to navigate this themselves rather than seeking professional retirement advice.

On a percentage breakdown, 70% of Australians reported experiencing anxiety and stress in relation to retirement savings as opposed to 67% in the US and 68% in Canada. Of those Australians surveyed, at least 33% across each age group reported having less than $50,000 in total savings for retirement.

The survey indicated that people:

  • Are more worried about running out of money in retirement than about potential health issues
  • Are planning to work longer thereby potentially denying themselves the freedom to pursue personal interests.
  • Of the retirees surveyed, 31% reported they were forced to retire because of circumstances beyond their control and 47% indicated this happened earlier than they had expected.
  • 51% are concerned about outliving their assets, and
  • 53% have no idea how they will pay for medical expenses in retirement. This indicates that by and large people have an inability to perceive and conceptualise retirement goals and how to plan for them.

People are motivated to be good at saving when they have clear goals such as buying a house or funding an overseas holiday because there’s a positive pay off that they will experience. However, when it comes to saving for retirement, there’s a difficulty to perceive and conceptualise their goals – the motivation isn’t at the same level – which results in either not enough being done to build retirement finances or worse doing nothing at all.

Many Australians will spend close to a third of their life in retirement however, only 5% said they would use the word ‘energised’ to describe their feelings about entering this phase of their life. Perhaps the realisation of ‘what am I going to do with myself with all this free time?’ is too confronting.
For some, the definition of retirement means different things than it does to others. Some might love their work so much it has become their personal interest. Others however, can’t get to that last day of work forever quick enough to be ‘free’ to do what they want when they want.

Planning for retirement is also not helped by the number of different projections thrown around in the media on the amount of money one will need to fund that part of their life. Ultimately the lifestyle you enjoy in retirement is going to be determined by the amount of your retirement savings however, the Association of Superannuation Funds of Australia (ASFA) suggests a ‘comfortable retirement’ will cost a 65 year old couple $61,522 per year while a single person should get by on $43,601.
This, according to ASFA’s research extrapolates into a starting superannuation balance of $750,000 for that 65-year-old couple and between $580,000 – $640,000 for the single person (the life expectancy for women is greater hence, the upper limit).

Research undertaken by Accurium, who provide actuarial services to SMSF accountants for over 65,000 self-managed super funds indicate that around 75% of 65-year-old SMSF’s have enough assets in their funds to afford their member/s a ‘comfortable retirement’. It follows that most should be able to navigate through that phase of life enjoying what they want to do when they want to. For those that want to live like the late George Best…who did know how to enjoy himself…you might need a bit more in your super fund.

Originally Published – Tuesday, January 21, 2020
Rockhampton Morning Bulletin – themorningbulletin.com.au