Research conducted by Milliman has found more than half of all retired Australians are restricting their spending to less than the age pension would provide, an income so low that up to a third of recipients fall below the poverty line.
The research identified the main reasons behind this frugality, with the fear retirees could run out of their super savings the leading cause. The average life expectancy in Australia indicates most people will on average live for 25 to 30 years post retirement. Coupled with the fact retirees have only had compulsory super for the later part of their working lives, many are worried they could run out of their savings and be forced to live on the pension or sell their family home.
While the age pension does provide a safety net for retirees, income and assets can reduce the amount you receive, and the complexities of the system can be confusing and distressing for many.
If you’re worried about not having enough super to retire comfortably, there are a few things you can do to help boost it.
How to avoid running out of super
- Check your fees – make sure you aren’t paying too much in account fees for your super as this will quickly start to eat away your savings once you retire.
- Consider growth assets – it’s normally recommended that you move to more conservative investments as you age but having all of your investments in fixed interest or cash could mean you struggle to keep up with inflation. Consider having some shares or other growth assets to keep building your super.
- Budget – it might be boring, but proper budgeting can really help to rein in excess spending while also making sure you have enough for the necessities.
- Downsize your home – selling and moving to a smaller property, particularly once the kids have moved out, can not only leave you with money in hand, but smaller houses often cost less to run and maintain as well.
- Use government incentives – even if you don’t qualify for the age pension, there are many other schemes that are designed to assist retirees with utilities, rates, travel and other necessities.
- Keep working – with all of us living healthier for longer, you don’t necessarily have to retire as soon as you reach 65. Consider if it’s practical for you to keep working, even if you move to part-time.
- Look into account-based pensions – these provide you with a regular income while still investing most of your super and can help with budgeting and planning your retirement.
Compare super funds with Canstar
The following table contains details regarding superannuation funds rated by Canstar. This table has been sorted by three-year average annual performance (highest to lowest).
Please note the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.
Performance is based on the investment option considered in the 2016 Superannuation Star Ratings, which is the option with 60-80% in growth assets; where multiple options satisfy this criteria, the option with 60-80% in growth assets with the greatest funds under management is selected.