A recent survey has provided insight into the magic figure Australian residents need in their bank account once they retire from the workforce – and it is not as much as you may think.
While many of the 10,000 plus people that responded offered numbers of up to $1million or $750,000, the actual figure according to the Association of Superannuation Funds of Australia (ASFA) is $640,000 for a couple.
The amount is $545,000 for those who are single.
These two figures also factor in holidays abroad, occasional fine dining and buying ‘nice things’ such as clothes.
Retirement can be a stressful time for some couples if they are not financially sound
The cost of living in Australia also has plenty of people concerned about their future
Susan Thorp, the Professor of Finance at Sydney University, was quick to stress retirement circumstances differ for each household based on income.
‘Most people think of a comfortable retirement as one where they are able to (more or less) maintain their pre-retirement living standard,’ she said.
‘How much we need to save to achieve that depends on our income, other assets and access to the Age Pension.
‘It is also important to keep an eye on your superannuation… if your nominated fund isn’t performing, move your money elsewhere.’
Sandra Buckley, CEO of national advocacy and networking group Women in Super, said women need to also factor in parental leave as well as reduced earnings due to part-time employment.
‘It can be a daunting process for some,’ she told news.com.au.
‘The right super balance can be the difference between living a dignified retirement with some financial choice, or struggling just above the poverty line.’
Buckley also recommends that women set aside an extra seven to eight per cent on top of their employer’s ongoing super contributions.
Besides retirement (40 per cent), mortgage payments (32 per cent), saving for a house deposit (25 per cent), insurance (20 per cent) and school fees (18 per cent) were among the future costs that concerned those who responded to the survey.
According to the Association of Superannuation Funds of Australia (ASFA), $640,000 will present a comfortable figure for couples looking to retire
The ASFA recommendation comes after Paul Keating, the architect of Australia’s superannuation system, said Aussies needed at least $300,000 saved up for a comfortable retirement.
The former Labor prime minister wants the government to raise employer superannuation contributions from 9.5 per cent now to 15 per cent – instead of a planned rise to 12 per cent by July 2025.
Mr Keating, 77, who led Australia when compulsory super debuted in 1992, explained why.
‘If you’ve got $300 or $400 or $500,000 you have options,’ he told the ABC’s 7.30.
‘What superannuation is about is personal empowerment.
‘You shouldn’t be forced to eat your own home.’
The architect of Australia’s superannuation system says Australians need at least $300,000 saved up for a comfortable retirement. Pictured are young women enjoying a few drinks at the Opera Bar on Sydney Harbour
Many Australians are a long way from achieving the recommended savings goal with official Australian Bureau of Statistics data showing average super balances of just $286,800 in the final decade before retirement.
Tax office data showed women aged 60 to 64 had even less, with average balances of $280,000 compared with $345,000 for men in the years just before retirement.
Mike Callaghan, the chairman of the federal government’s Retirement Income Review, suggested retirees have super savings that allowed them to spend 65 to 75 per cent of what they had previously earned every year.
From July 1 this year, compulsory employer superannuation contributions are rising from 9.5 per cent to 10 per cent for adults who earn at least $450 a month.
They are rising to 12 per cent by July 2025 with incremental half a percentage point increases at the start of each financial year until then, under existing legislation.
Former Labor prime minister Paul Keating wants the government to raise employer superannuation contributions from 9.5 per cent now to 15 per cent – instead of a planned rise to 12 per cent by July 2025
Superannuation Minister Jane Hume hinted Prime Minister Scott Morrison could revisit increasing compulsory super levels from the existing rate of 9.5 per cent.
When can Australians access their super?
For those born before July 1, 1960, it’s 55
The rises to 56 for baby boomers born between July 1, 1960 and June 30, 1961
It’s 57 for those born between July 1, 1961 and June 30, 1962
It’s 58 for those born between July 1, 1962 and June 30, 1963
It’s 59 for those born between July 1, 1963 and June 30, 1964
It’s 60 for anyone born after July 1, 1964
‘We shouldn’t fool ourselves. A rise in the super guarantee will come at a trade-off, it will come as a trade-off to wages and particularly to wage growth,’ she told the ABC.
‘The Prime Minister has said very clearly that he will make a decision closer to the time and the reason why he’ll make a decision closer to the time is because he has to consider the economic circumstances that are relevant at that point in time.’
Australian wages growth has been below the 3 per cent mark since 2013 and the Grattan Institute think tank, like some Liberal MPs, has linked this to superannuation increases.
The Keating government introduced compulsory superannuation in 1992 and in 1995 legislated to have it reach 15 per cent but John Howard’s Coalition government cancelled that and pegged the rate at nine per cent.
Some Liberal MPs, including former tennis star John Alexander, want Australians to be allowed to use their super savings for a home mortgage deposit.
But Mr Keating argued having more in super savings meant a retiree could pay off their mortgage later.
‘So, the more people can put into superannuation and let the great magic of compounding carry them along, they can find themselves with you know, half a million, $600,000 at age 60 and they can knock off the balance of their mortgage,’ he said.
In 2010, Julia Gillard’s Labor government legislated to have super contributions rise to 12 per cent by July 2019.However, Tony Abbott’s Coalition government in 2013 delayed this increase.