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Tuesday, December 7th, 2021

How much money do you need to retire? The answer depends on one big thing

Yumi isn’t comfortable with the idea that she’ll likely be relying on her partner’s super to retire.(ABC News: John Gunn)

Yumi Lee is 56 and should be looking forward to retiring in the next decade.

But after years out of the workforce and time working overseas, she has less than $10,000 in superannuation.

Yumi’s not alone in worrying about her retirement.

Six out of 10 of us consider being able to retire comfortably a personal problem, while about nine out of 10 of us consider it a national problem, according to the ABC’s Australia Talks National Survey 2021.

And if you’re a woman, you’re more likely to be worried about having a comfortable retirement than a man would.

That’s not surprising, considering that on average, women retire with about half the amount of super that men do.

After all, women are more likely to take on caring responsibilities and work part-time.

Like many women, Yumi will have to rely on her husband’s superannuation when she retires. It’s a prospect that she is not entirely comfortable with.

She knows how quickly personal circumstances can change, given her advocacy role as manager of the Older Women’s Network in NSW.

“With my work history and lack of savings, I will be one of those in that cohort of older women who really struggle.”

But despite the super inequality faced by women, research from Federal Treasury’s Retirement Income Review (and backed up by the Grattan Institute) has found that when all forms of support are taken into account, most of us will actually be able to look forward to a comfortable retirement.

In fact, most of us die with the bulk of the wealth we had at retirement intact.

So why are we all so worried about not having enough?

Well, it could have something to do with the super companies’ messaging, but it also might have something to do with whether or not you’re a homeowner.

Let’s dive into that a little deeper.

The Australian Super Fund Association (ASFA), which is the peak body in this country on all things super, says a modest lifestyle will mostly be met by the age pension.

It estimates the amount of money you need (in savings or super) for a single or a couple living on the basics is $70,000.

And if you want to live comfortably in retirement, as a couple you would need $640,000. If you’re a single person, it would be $545,000. But that’s if you’re getting a partial age pension.

Basically, Treasury says if you can maintain 65-75 per cent of your pre-retirement income (after tax) you’ll be ok.

Michael Smith, an associate professor in international business at RMIT, says most retirees won’t even need that much.

He blames super companies for peddling anxiety and fear around retirement benchmarks.

“These figures are ridiculous and they are completely built around vested interests,” he explains.

But there’s a big catch

The retirement income estimates used by Treasury and super funds are based on you owning your own home and retiring at the average age of 65.

In other words, if you’re renting in the private market or retire involuntarily before the age of 65, you’re more likely to end up in poverty (yes, you read that correctly!).

Brendan Coates from the Grattan Institute agrees that the superannuation industry’s estimates are way too high, and that average income earners eligible for part pensions can retire comfortably with a lot less savings.

“Around $200,000 is in the right ballpark for a couple if they own their own home and $150,000 for singles,” he says.

“If they don’t own their own home, it’ll be higher.”

With home ownership declining, it’s probably no surprise, then, that we’re more worried about being skint in our twilight years.

“We’ve got a retirement system which has evolved so that it’s based on how much money you earn, and how long you earn it. And as well, whether or not you’ve been able to pay your house off.”

It’s a message that is not lost on Laura Edwards, 28, who currently has about $40,000 in super.

Laura and retirement
Laura has switched from investing in super to saving for a house deposit.(ABC News: John Gunn

)

Laura was salary sacrificing about $800 a month into her super account, but recently moved back in with her parents and is now saving for a house deposit instead.

“To comfortably retire, I think a property really helps with that, so that is one thing I am looking towards. I am also looking at getting into investing,” she says.

The financial services worker also shared some basic tips for young people who want to set themselves up for a comfortable retirement.

“You want to envision your super as a savings account you will eventually access,” she says.

She suggests consolidating your super, checking your fund’s performance, checking the fees and making sure insurances like death and total and permanent disability are right for you.

“I am basically saying that I really love watching my money grow, and I check it every month,” she adds.

Disclaimer: This is general information. If you need individual advice, please seek out a professional.

The Australia Talks National Survey asked 60,000 Australians about their lives and what keeps them up at night. Use our interactive tool to see the results and how your answers compare.

Then, tune in at 8:00pm on Monday, June 21 to watch hosts Annabel Crabb and Nazeem Hussain take you through the key findings and explore the survey with some of Australia’s best-loved celebrities.

 

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