Do you have enough money in your super or pension fund for a comfortable retirement? There’s a strong chance you don’t, according to new data from the Association of Superannuation Funds of Australia (ASFA).The association yesterday published An update on superannuation account balances, which warned that most Australians are below the required retirement mark. “Currently just over 30 per cent of Australians are able to afford expenditure in retirement at or above the ASFA Comfortable Retirement Standard level,” the report states.
Further analysis shows that the majority of those who fall short of the ‘comfortable retirement’ balance are older Aussies. Drilling down further still, it’s more likely those older Australians will be women.
ASFA CEO Mary Delahunty said the disparity emphasised the importance of proposals aimed at reducing the super gender gap, particularly the payment of super on parental leave.
Comfortable retirement – why women fall short
“Women are more likely than men to have had time out of the workforce following the birth of a child. With the current settings, this time out of the workforce to raise the next generation becomes a financial penalty for women in retirement,” Ms Delahunty said.
The solution, she said, starts with parental leave super. But it should not end there, she continued.
“The introduction of super payments on paid parental leave will assist to bridge the gender retirement gap,” she said. “But there is still work to be done. Adequate and equitable pay, the valuing of care work, and tax settings all need examining to ensure women aren’t left behind.”
Why older Australians are lagging
Older women, in particular, are likely to lack the super funds required for a comfortable retirement. The underlying cause of this is also the reason older men are more likely than younger men to be underfunded.
The ASFA report identifies the cause as historical. When the Superannuation Guarantee was introduced in 1992, the mandatory contribution rate was just 3 per cent. (For employers with an annual payroll above $1 million, the mandated rate was 4 per cent.)
Government legislation ensured that rate would rise over the ensuing years to its current 11.5 per cent, but that leaves many Australians who commenced work before 2000 behind the eight ball. And the earlier those Aussies joined the full-time workforce, the more likely it is that a comfortable retirement is beyond them.
The good news for the nation as a whole is that this will be a short to medium-term problem. Indeed, Ms Delahunty said projections indicate the proportion of Australians with enough for a comfortable retirement will be at least 50 per cent by 2050.
Attaining the comfortable retirement dream
For many Australians nearing retirement, the ASFA report suggests prompt action is required to reach the comfortable retirement level. For example, the median pension account balance for men aged 60-64 was $205,385 as of June 2022. For women of the same age, it was just $153,685.
Viewed in isolation, these may seem like significant amounts. But the problem becomes clear when they’re lined up against the industry’s comfortable retirement standard. For singles that amount is $595,000, and for couples it’s $690,000.
This is not to say you should panic if you are currently below that mark. However, making an appointment with a registered financial adviser sooner rather than later might be a good idea.
That might be an uncomfortable thought; indeed the entire process might be uncomfortable. But it’s likely to be well worth it if the payoff is having enough super to enjoy a comfortable retirement.
Do you know if you have enough super for a comfortable retirement? What steps have you taken to help you get towards that mark? Let us know via the comments section below.
Also read: Most Aussies don’t know how super works
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