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Will your super be enough in retirement?

Only 54% of Australians believe their superannuation will be enough to see them through their retirement according to MLC’s Australia today report.

However a staggering 76% of those with financial planners or advisers and 63% of those with accountants, agreed that they would rely on their superannuation in retirement.

How much does a comfortable retirement cost?

With the Association of Superannuation Funds of Australia (ASFA) estimating couples need $58,922 pa for a comfortable retirement and $34,064 pa for a modest retirement, and singles need from $23,000-$43,000 pa for a modest to comfortable retirement, those who aren’t prepared will face a significant shortfall.1

The cost of confidence is high

It seems we need a very high asset value to feel prepared for retirement. According to Australia today, just over half of people with assets over $1 million dollars, excluding the family home, feel very or fairly well prepared for retirement.

Meanwhile, only 34% of people with between $500,000 and $1 million net investable assets feel very or fairly well prepared and only 7% of people with less than half a million dollars feel prepared.

It’s an extraordinary amount of money – the cost of achieving confidence in your retirement plans is high.

Australians are topping up their super

Most likely due to this uncertainty about having enough super, and the potential tax advantages, many Australians are topping up their retirement savings. Twenty-nine per cent of respondents made additional contributions to their super funds in the 12 months preceding the release of Australia today.

Retirement preparation is more than having a super lump sum

Many Australians are accumulating sizeable super balances but are still feeling unprepared – probably because retirement preparation is about far more than having a super lump sum. Many of us will need help working out how to invest the money intelligently and how to spend wisely to make it last.

Knowing whether your super will be enough requires help from a financial professional; unless you’re prepared to do a lot of research yourself. You need to work out how your money will be invested while you draw down from it, how much you need to support the lifestyle you choose and how that lifestyle will change as you age.

How you can access your super once you retire2

When you reach preservation age, you can access your super as long as you are permanently retired (or have reached age 65). If you haven't permanently retired, you can still access part of your super via a transition to retirement pension.

How much will you get?

Your final retirement benefit is determined by:

  • your employer's contributions over your working life
  • your own additional contributions
  • your investment returns
  • the tax you pay, and
  • the amount of fees.

How you get paid is up to you

You can choose to take your super as a lump sum, or as retirement income stream, or a combination of both. If you choose to receive your super as a regular income stream by rolling it into account based pension, the money that you're not accessing in an account based pension continues to work for you in a tax effective environment.

When can you receive the age pension?3

From 1 July 2017, the qualifying age for the Age Pension will increase from 65 years to 65 years and 6 months. The qualifying age will then increase by 6 months every 2 years, reaching 67 years by 1 July 2023.

If you were born between

you qualify for Age Pension at age

1 July 1952 to 31 December 1953                   

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

From 1 January 1957

67 years

Your super last longer with professional help

Laura Demasi, Research Director for the Australia today report comments: “People’s lifestyles in retirement, their confidence and security is mainly about super. People who may experience the biggest change in lifestyle in retirement may be women and lower social grades. Downsizing will become essential for many, and without enough super, the primary home will have to pay for retirement.”

“The earlier people engage the help of financial professionals, the more likely they are to feel confident about their future and their retirement lifestyles. Building the biggest super balance you can is one half of the equation, then it’s about getting professional help to make it last.”

 

Read more from Australia today

Financial advice boosts confidence in retirement

Financial professionals reduce reliance on government support

Investing for retirement pays off

Pre-retirees are toping up their super

Knowledge gives you super power

A path to saving retirement

Solving the gender gap in retirement

 

Sources:

MLC and IPSOS, Australia today report, Aug 2016.

1 ASFA Retirement Standard, March Quarter 2016.

2 ASIC MoneySmart; Getting your super, August 2015.

3 Australian Department of Human Services, Age Pension, 21 March 2016.