A “set and forget” mentality could be costing Australians thousands of dollars, but reviewing one particular aspect could turn that all around, research reveals.
According to new research from MLC, a lack of member awareness about their superannuation risk profiles is costing Australians, and particularly young women, thousands of dollars.
To MLC’s general manager of customer experience, Super, the blame lies with Aussies’ ’set and forget mentality’ and the solution is stronger engagement.
“Being in the right super risk profile is one of the key factors that will determine how much you have when you retire, but it’s often overlooked.
“As an example of the difference it could make, a woman aged 25 on $80,000 a year in a conservative risk profile until she’s 70 could improve her super balance by around $294,000 if she adjusted her profile according to her circumstances and life stage.”
The superannuation risk profile is a means of identifying where members sit on the investment risk-taking spectrum by measuring risk tolerance to fluctuations in investment value, MLC explained.
Members who choose, aggressive, moderate or conservative will most likely end up with different returns, but preference depends on life stage, financial position, time frame and general investment appetite. As such, most Australians will need to change their risk profile as their lives change, MLC continued.
Forty-five per cent of young women said they do not know their risk profile, something MLC considers concerning given that the average Australian woman has 44 per cent less in super than a man of the same age.
MLC said all Australians should use the Christmas break to cast an eye over their risk profiles and check that it’s appropriate.
“If there’s one thing every Australian can do right now to improve their retirement it’s to get in touch with their super fund and check what risk profile they are in, and, if it’s not right for them, to adjust it accordingly.”
MLC’s findings come from its latest Q2 Wealth Sentiment Survey, which also revealed that nearly one in five respondents had been unable to save any of their income in the last few years. Additionally, more than a quarter saved only 1-5 per cent.
When it comes to retirement, just 18 per cent of respondents would willingly use the family home to fund their golden years but 37 per cent of Australians think they won’t have enough money to retire on at all. These results are up on the 30 per cent of respondents who said they wouldn’t have enough to retire on in the first quarter of 2017.
The average Australian predicts they will need $1,124,000 in savings or investments on retirement, but thinks they will only have $721,000 outside of the family home. Low income earners predict they will require between $752,000 and $822,000 and high income earners think they will need $1,436,000.
Most working age Australians have super, but 20 per cent of those on less than $35,000 a year have a current fund compared to just 3 per cent of Australians with incomes exceeding $100,000.