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Retirement at risk as superannuation falls short

The retirement of almost half of the Australians aged between 50-70 is at risk according to alarming new research released by superannuation Company MLC.

Is your retirement at risk because of superannuation shortfalls? (Source: Shutterstock)
Is your retirement at risk because of superannuation shortfalls? (Source: Shutterstock)

According to the research, 43 percent of those surveyed admitted to having a superannuation balance of less than $100,000, with 33 percent of the same age group admitting to having $50,000 or less, significantly less than experts say is needed to live comfortably into retirement.

These results have created cause for concern among financial planners like Jessica Higgins from MyLife MyAdvice, part of Catholic Super Fund (CSF) Pty Limited.

“I entered the financial planning profession because I am passionate about helping people make informed decisions about their finances, so it is certainly concerning to see that 33 percent of Australians aged between 50 and 70 have less than $50,000 in their super balances,” Ms Higgins says.

“Australians [in this age group] helped build Australia into the nation it is today and to think that they have worked hard and now face the threat of poverty in retirement is alarming.”

According to Ms Higgins, a super balance of $450,000 is needed for single older Australians, she adds that anyone with anything less has a 50 percent chance of not being able to sustain a comfortable income in retirement for their life expectancy.

“Ideally we want this to extend at least 5 years beyond life expectancy so a super balance of $545,000 will certainly make a difference,” she says.

“We are in the fortunate position that in Australia we have the Age Pension so when we look at what is needed to live comfortably, for most people, Age Pension forms part of that calculation.

“At present, the full Age Pension is $23,095.80 per annum for singles, and $34,819.20 per annum for couples – which is well short of what is required to live comfortably in retirement.

“We are living longer, meaning if we want to enjoy our golden years, we need to look at investments to enable us to achieve that – we certainly don’t want to retire and just get by – we want to go out there and enjoy life.”

When looking into the cause of the lack of superannuation for those Australians aged 50-70, Ms Higgins says there are a “myriad” of reasons, but says the late introduction of compulsory super has a big role to play.

“For the majority of baby boomers, compulsory super didn’t come into effect until 1992 and when it did come in, the employer was only required to contribute 3 percent,” she explains.

“Whilst this has increased to 9.5 percent and will continue to increase to 12 percent by July 2025, the research shows that this still isn’t going to be enough, especially when you factor in career breaks.

“For some, they know they don’t have enough so they just give up; what they don’t understand is that with the appropriate advice and time, we can change this outcome for the better.”

While admitting that the best time to start looking at your super balance and planning for your retirement is the “first day on your first part time job”, Ms Higgins says that it’s never too late.

“We work hard for a large part of our life – we owe it to ourselves to enjoy our retirement years,” she says.

“Unfortunately it’s not going to just happen for you, it takes work on your part.

“Those who seek financial advice are in a much greater position to enter the world of retirement than those who have not, it can help you get closer to that goal rather than falling $100,000 short of the figure required, you may only fall $50,000 short.

“That could make a significant difference to what retirement looks like for you.

“In the initial years, superannuation is going to provide us with the funds to go out there and enjoy retirement, while later, it will help cover other costs, namely medical.

“Having a superannuation balance could afford you the opportunity to stay in your own home longer, and should you need to enter an aged care facility, a superannuation balance could give you more options into which facility you will call home to enjoy your twilight years.

“Pick up the phone, speak to one of the super specialists at your super fund’s call centre – the sooner you start planning for your retirement, the greater chance you have of attaining your goals.

“Employ the skills of a professional to help you ascertain what a comfortable retirement looks like for you, get a snapshot of your present position and formulate a plan to help achieve it then continually review to ensure you are on track.

“Failing to plan is planning to fail, so become engaged.”

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