Retirement prospects not so super as savings fall short

By Liz Maroney, Westlawn Wealth Adviser
SMSF Specialist Advisor™
16 August 2017

A number of recent surveys have found that many Australians aren’t feeling confident that their super savings will provide for the lifestyle they want in retirement. And it is women who appear particularly concerned about their prospects for a comfortable retirement. But all is not lost. There are simple strategies you can start now that can help make a big difference to your savings in retirement.

The latest MLC Wealth Sentiment Survey has revealed that the number of Australians who think they’ll have “far from enough” in retirement has risen from 24% in the fourth quarter of 2016 to 32% in the first quarter of 2017.

Overall, the survey found that 1 in 2 Australians don’t think they’ll have enough to retire on.

So how much do Aussies think they will need in savings to retire comfortably? The answer is $1,142,000[1] at retirement, according to those who participated in the MLC survey.

But the amount of retirement savings the survey respondents expect to have saved by retirement is $638,0001. That’s just over $500,000 less than what they expect they’ll need.

It’s perhaps no surprise then that while the words used by survey respondents to describe the type of retirement they want versus what they expect are at opposite ends of the spectrum.

When asked about the retirement they want, common words used included relaxed, travel, comfort and freedom.

However, the words used to describe the type of retirement they expect to have included frugal, stressful, worried and struggle.

Women feeling most pessimistic

When comparing the genders, women are feeling more pessimistic than men about their finances in retirement, the survey found.

While 62% of women don’t expect to have enough savings to retire on, 52% of men felt the same. Nearly 1 in 3 women think they’ll have “far from enough” compared to 1 in 4 men.

The results of the MLC survey are supported by another survey conducted recently by online investment website

The Nest Egg Retirement Sentiment Survey found that a gender confidence gap existed with regards to super with 45% of male respondents saying they thought their super savings alone would be enough to maintain a comfortable lifestyle throughout retirement. However, only 23% of female respondents shared the same level of confidence.

More than half of the women surveyed (53%) said they expect their super savings to provide only a ‘modest’ or ‘basic’ standard of living in retirement, compared to just 35% of men.

Super account imbalance

It’s no real surprise that many women are lacking confidence in their super given that men generally have more in their super account balance.

A 2015 Association of Superannuation Funds of Australia (ASFA) research paper, Superannuation account balances by age and gender, found that for those with money in a super account, the average balance for men was around $135,000 and for women it was around $83,000.

Bob Deutsch, Senior Tax Counsel at The Tax Institute, wrote in a July Cufflinks article that this super gender gap is driven by a number of factors including:

  • Lower workforce participation rate of women compared to men
  • Disproportionate representation of women in part-time and casual employment
  • Gender pay gap, and
  • Interrupted working lives due to, amongst other matters, having children, and disproportionate amount of unpaid caring work.

In our Westlawn newsletter of March 2014, I wrote about this gender gap in Women still lagging in the super stakes, urged to act now. In that article I provided some tips for women on how they could catch up to their male counterparts.

How much can you afford to spend in retirement?

So, how much do you really need to save for a comfortable retirement?

ASFA’s retirement standard states that for a couple who own their own home, they’ll need $640,000 when they retire for a comfortable lifestyle. For a single person with their own home, that amount is $545,000.

This will allow them to purchase household goods, have private health insurance, own a decent car and be able to do some travelling, according to ASFA. You can find out more at ASFA’s Super Guru website here.

“What’s interesting is that respondents said they need over $1 million to retire on, but even small super balances help in retirement, so instead of being worried and fearful, people should feel motivated and empowered to take the little steps that make a big difference.”

MLC general manager of customer experience, superannuation, Lara Bourguignon

Of course, the ASFA retirement standard is a generalisation.

Brian Long, Head of Retirement at MLC, writes that “how much you can afford to spend in retirement is determined by a number of different factors including investment markets, your super balance and lifestyle”.

In his 28 July 2017 article, How much can you afford to spend in retirement, Brian states that “understanding your expected spending patterns and ensuring you have an appropriate investment and drawdown strategy can help you determine whether you can support your desired retirement lifestyle”.

To calculate how much you may need in retirement, start with the MoneySmart retirement planner calculator. For a more detailed calculation, speak with your Westlawn Wealth Adviser.

Super strategies to boost your super

The more super you can save throughout your working life, the more you will have to spend once you retire. Here are some simple but effective super strategies to consider:

Making spouse contributions is another strategy that may benefit some couples. If one spouse is earning less than $40,000 pa[2] the other spouse may want to make an after-tax super contribution on their behalf. Making a spouse contribution can provide a tax offset of up to $540[3] for the contributing spouse, while also increasing the retirement savings of the spouse receiving the contribution.

Start planning your retirement lifestyle today

Start taking the little steps today that can make a big difference to your super savings later on. Talk to a Westlawn Wealth Adviser about planning for your retirement by contacting us on:

Copyright © 2017

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[1] Excludes the family home.
[2]  Includes assessable income, reportable fringe benefits and reportable employer super contributions. Other eligibility conditions apply.
[3] Maximum tax offset is available where spouse income is $37,000 or less. Tax offset amount gradually reduces for income above this amount and completely phases out when spouse’s income reaches $40,000.

Westlawn Wealth Adviser, Liz Maroney is a ...

About the MLC Quarterly Australian Wealth Behaviour Survey

The survey aims to assess the investment environment including investor intentions and behaviours. The survey is based on survey participants responses related to:

  • Current financial situation
  • Investment intentions
  • Superannuation
  • Retirement
  • Their homes.

Over 2,000 respondents participated in the Q1 2017 Wealth Sentiment Survey, with weights applied to age, location and gender to ensure the survey reasonably reflects the Australian population.

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Liz Maroney and Westlawn Wealth Management Pty Ltd ABN 32 124 861 409, Authorised Representatives of GWM Adviser Services Limited ABN 96 002 071 749, Australian Financial Services Licensee, 105 -153 Miller Street North Sydney NSW 2060.