Is A Comfortable Retirement Actually Achievable?

What is a comfortable retirement, and is it attainable for most Australians?

In his keynote speech at the ASFA 2015 conference, CEO of AustralianSuper, Ian Silk, said that what the superannuation industry does is not about money, but about people.

“(The industry is) simply about two things – our customers, our members, having the best shot we can give them at a comfortable life, and the confidence to take hold of it and enjoy it,” he said.

“And let’s be honest about what success looks like. Everyone here knows the key thing that matters is long term net performance. We don’t kid ourselves about that but sometimes we’re willing to kid consumers…”

What is a comfortable retirement?

According to the Association of Super Funds of Australia (ASFA), a couple retiring now would require around $58,800 per annum for a comfortable lifestyle. “Comfortable”, by the way, is not extravagant. It involves one holiday within Australia each year, having a good range and quality of food, owning a reasonable car, the ability to afford bottled wine, a range of leisure activities, the ability to afford private health insurance and home renovations every 20 years. You can see the full explanation of a comfortable retirement here.

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A general rule of thumb is that, if the home loan has been paid off, about two-thirds of your before tax pre-retirement income would allow you to maintain a similar lifestyle. How many years this income will be needed depends on how long you live. If only we had a crystal ball!

But with the Grattan Institute last year estimating that a typical 30-year old would lose approximately one quarter of their total balance to fees, by the time they reached retirement, is the current superannuation system best serving the needs of its members?

Beyond taking aim at the marketing strategies of the small handful of funds that have promoted “no fee” passive funds – and the subsequent media attention these funds have generated, Mr Silk did not address the issue of fees being charged for compulsory savings. Rather, his proposal to help people achieve a comfortable retirement centered on the need for:

  • policies that will generate 12 per cent superannuation savings from the average wage
  • policies that address or compensate for broken work patterns, something that has a huge impact on women, and
  • policies that encourage people to save for the long term.

“These three simple actions which, when underpinned with confidence and trust, would create a thriving future for millions of Australians,” he said.

Will Your Super Be Enough?

With life expectancy increasing, according to life expectancy data released by the Australian Government Actuary in 2014, a 65 year old male can now expect to live until around the age of 83 and a 65 year old female until around 86. Remember this is on average, and many of us may choose to retire earlier, so if you have only planned for your retirement funds to last for 20 years, there may be a number of years beyond those where you may need to rely solely on the age pension, whatever amount that might be when you retire!

More may be necessary to fund any planned one-off expenses like paying off any remaining debt, taking a holiday, buying a car or renovating the home – or all of the above!

While superannuation isn?t the only vehicle to get us to our desired retirement outcome, it can be a powerful tool when used appropriately.

To find out how you could be maximising your super and whether you?re on the right track to achieving your desired retirement outcomes, consider contacting a financial planner.

Many super funds provide financial advice, and depending on the complexity of your situation they may do it for minimal or no cost, often over the phone. Another great starting point is the ASIC MoneySmart website, where the Australian Securities and Investment Commission (ASIC) provide some great tips and tools.

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Compliance Disclosure and Liability Disclaimer

Sponsored products displayed are paid advertisements and Canstar receives a fee for referring you to the advertiser.  Past performance is not necessarily a guide to future performance; unit prices may fall as well as rise. Performance information shown is for the historical periods up to 30/06/2016 and investment options noted in the product information. Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the maximum applicable ongoing management fees and membership fees. Performance information is provided by Rainmaker Information Pty Ltd ABN 86 095 610 996 AFSL 461816 (www.rainmaker.com.au) which provides general information on superannuation. Any advice on this page is general and has not taken into account your objectives, financial situation or needs and is not a recommendation for your particular circumstances. Consider whether this advice is right for you. Consider the product disclosure statement before making a purchase decision. You may need financial advice from a qualified adviser.

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