Are you ready for retirement?
Well, according to new research by Finder, millions of Australians won’t be able to financially support themselves when they stop working.
In fact, the survey of 1,063 respondents found that 23% of Aussies – equivalent to 4.6 million people – admit they don’t have enough money in their super fund or other investments to get by in retirement.
|Do you think you’ll have enough superannuation to get by in retirement?|
|I’m not sure if I will or not||27%|
|No, not in my super or other investments combined||23%|
|Yes, I’ll have enough to get by but will probably have to cut back on my spending||22%|
|Yes, I’m confident I’ll have enough money to live comfortably in retirement||17%|
|No, not in my super, but I’ll have enough through other investments||11%|
|Source: Finder survey of 1,063 Australians, September 2023|
The research also found that a further 27% admit they are not sure if they will have enough money to survive once they leave the workforce.
One in ten (11%) said their retirement balance is too low but they will have enough in other investments to get by once they say farewell to working.
Meanwhile, women are worse off with 27% admitting they won’t have enough in super or other investments, compared to 18% of men.
Finder’s research also shows just over 1 in 5 (22%) Australians say they will have enough to get by but will probably have to cut back on their spending.
Superannuation is something many Australians, including the younger demographic, don’t engage in enough.
It can be a sad case of ‘too little too late’ for many who realise that by the time they reach retirement age, their super balance will fall well short of the amount of money they will need.
The Age Pension is asset-tested in Australia so you may not qualify.
Aussies need to take a couple of steps to engage with their super now.
First, it’s essential to know how much you have in super and to consolidate your funds.
You pay fees for each fund you have – it’s like having your savings split across 3 savings accounts and paying account-keeping fees on all of them.
It makes so much sense to bring it all together and spend less on fees, so more money stays in your name, working towards building your wealth.
Those in a position to do so should also consider contributing to their super balance, by forgoing some of their pay through salary sacrifice.
Any income earned within your super is capped at a maximum tax rate of 15% per annum.
If you currently pay say 32.5% tax, you’re ahead immediately.
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For instance, if you salary sacrifice $1,000 over 12 months, you’d pay $150 on that income and $850 will go to super where it will be invested for your future.
Otherwise, you’ll pay $325 tax on that money and have $675 in your bank account.
Obviously, once you put the money into super you can’t get it back out so start small – but even $100 a month would make a difference thanks to compounding interest.
Consumers should also make sure their super fund is good value for money.
Make sure you aren’t stuck in a fund charging exorbitant fees and check regularly that your employer is paying your 11% Superannuation Guarantee contributions on time.
1. Choose the right superfund
The first step to preparing for retirement is to make sure you're in the right super fund.
You want a fund with low fees and a history of high, long-term returns as well as an investment strategy you agree with.
2. Salary sacrifice if you can
Super salary sacrifice is an easy way of contributing more to your superannuation throughout the year from your pre-tax income before you're paid.
This effectively reduces your taxable income, meaning you pay less tax on your income.
3. Start small, and start ASAP
The last decade or so before retirement is a good time to make sure everything is in order, but everything before then is the best time to save as much as you can.
Remember, the money you put into your super fund usually grows over time.
It might seem like it's disappearing, but in fact, it's doing the exact opposite.