Do Australians think they’re on the path to a comfortable retirement?
Yes and no.
In early 2008, as the GFC hit the accelerator, AXA Insurance reported only 51 per cent of working Australians felt ready for retirement. The same poll revealed only a third of Australians had actually figured out how much retirement income they’d have. Another 35 per cent have never reviewed their retirement plans. A report by Mercer Superannuation Sentiment Index shows one in four Australians don’t think their retirement income will last past the age of 80.
While ignorance may be to blame for some of this lax approach to retirement, market forces haven’t helped matters. Younger workers have been able to ride the storm; even if their stocks lost money in the financial crisis, they have years to build it back up. Older workers don’t have this luxury, which is one of the reasons more than 90,000 Australians have opted to stay in the workforce past age 65 since mid-2007, as reported by The Daily Telegraph. That same article said super funds lost an average of 12.9 per cent when the financial crisis was in full steam.
Compounding this issue is the fact that many consumers have the misconception that all super is invested in shares. Not fully understanding how super funds work can lead to higher losses. Most default options expose roughly 70 per cent of your portfolio to shares, but you can adjust this amount and even choose to put the whole balance in cash.
But it’s not all bad news. Those Australians who have realised they might not be prepared to retire have stepped up their efforts to save. Some of this action means deciding to work longer. Other solutions include increasing personal contributions and setting up separate investment portfolios to boost overall savings.
If you feel your retirement savings are looking a little low, consider your options. Government co-contribution can help those with low to moderate incomes – including those who are self-employed – boost their super by making personal payments to their accounts. The government can match up to $1,000 of these contributions. Those in higher tax brackets may benefit from salary sacrifice, where you can pay pre-tax income beyond your employer’s required 9 per cent.
Another option is to build a separate investment portfolio so you have a little something extra. You can access your earnings whenever you want, which helps offset the limits of dipping into your super. The one downside is investment money does not fall under the same tax benefits as super. High-interest savings accounts are another choice for all income levels to maximise returns during retirement.
Do you feel confident you’re saving enough for retirement?