According to recent studies almost half of Australia’s population believe they are inadequately prepared for retirement or have not prepared at all.
Australians’ retirement savings and investments will run dry within just 10 years of finishing work. The significant shortfall makes Australia’s retirement status the worst in the Asian region and the fourth largest gap globally, HSBC’s Future of Retirement report has found.
The report, which surveyed 16,000 people worldwide, also found among Australian respondents 16 per cent believe they will never be in a position to fully retire compared to the global average of 10 per cent.
Australians expect their retirement to last 23 years but the shortfall of 13 years is among the worst of the 15 markets surveyed.
The Association of Superannuation Funds of Australia’s Retirement Standard said for Australians to have a “comfortable” retirement single people need $430,000 in retirement savings and couples need $510,000.
An ASFA spokesperson said people are living longer in retirement than ever before — the average life expectancy in Australia is 83 — and they need to prepare for this.
“It’s important they plan to save enough so they can live comfortably for all of their post-work years,’’ she said. The earlier you start saving the more you will benefit from the magic of compound interest.
ASFA data released last year showed in 2011-12 the average super balances of Australians was $197,000 for men and only $105,000 for women and most retirees would need to rely on the age pension in retirement.
The HSBC report recently found that paying off a mortgage or other debts was a significant barrier a majority of Australians (51 per cent) to financially prepare for retirement.
HSBC’s head of retail banking and wealth management Graham Heunis said, “Australians are in denial about retirement planning.”
“Being concerned is not enough — the next generation need to take action and start saving now.”
Equip CEO, Danielle Press, said it was entirely understandable that younger Australians placed a greater priority on meeting their immediate needs, like buying a house, than on retirement planning.
“Retirement is a long way off when you’re in your mid 20s. But from a superannuation savings point of view, it’s also the time when regularly making small additional contributions, even just $20 a week can make the most difference to your retirement outlook.
“As you get older and your super benefit gets larger, there comes a point when investment returns make the most difference, but contributing when you’re younger gives your money many more years in which to grow,” she said.
Whatever your age and no matter how much money you have, now is the time to start building your super. Make a few small changes and watch your super money grow.
ASIC’s MoneySmart Retirement Planner website is a good place to start. This handy resource shows you:
- How to look at your situation and make improvements
- What income you're heading for in retirement
- How to boost your super savings
If you want to boost your retirement income, you can consider:
- Increasing your super contributions
- Trying to reduce the fees paid to your financial planner or managed fund
- Putting your money into slightly less conservative investment options (but get financial advice before you act)
- Retiring later to keep the money coming in for longer
- Getting part-time employment
- Opting for a more modest lifestyle so you need less money in retirement