Only 30% of Australians can afford a ‘comfortable’ retirement, where do you stand?

New research from the Association of Superannuation Funds of Australia (ASFA) outlines only 30% of Australians can afford a ‘comfortable’ retirement as defined by ASFA’s ‘Comfortable Retirement Standard’.

A ‘comfortable’ retirement is defined as having an ability to manage everyday expenses, going out for the occasional restaurant meal and taking an overseas holiday every seven years.

Based on ASFA’s comfortable retirement standard, couples aged 65-84 who own their own home now need $690,000 in super to fund their retirement, while singles need $595,000. This equates to $73,337 a year for a couple and $52,085 a year for a single.

Comparatively, according to ABS data, the average superannuation balance for men aged 60-64 in 2022 was $380,737 while women in the same age group had a lower average of just under $300,717. The median amounts are far lower indicating disparity of wealth.

Interestingly, couples are more likely to reach the ASFA Comfortable Retirement Standard than single people due to the combined superannuation balances and shared living expenses, which enable them to stretch their resources further.

The report’s findings also highlight there are still considerable gaps in knowledge and preparedness among individuals approaching retirement and it really emphasises the value in engaging expert financial advice to support retirement outcomes.

We’ve summarised our key findings from the research, including considerations in engaging a financial planner to better support your financial future.


✓  Optimise Retirement Outcomes

The ASFA report indicates that only 30% of Australians currently meet the ASFA Comfortable Retirement Standard.  With the target set to increase to 50% by 2050, a financial adviser could help you to reach this standard sooner.

Advisers can assess your current superannuation balances, predict future needs, and tailor a strategy to help you achieve a comfortable retirement, factoring in individual goals and inflation.

✓  Investment Returns and Managing Risk

The volatility of investment returns in superannuation adds another layer of complexity. According to ASFA, after a 3.3% loss in the 2021-2022 financial year, investment returns surged with a 9.2% gain in 2022-2023.

To reduce this type of exposure, financial advisers can help you manage this volatility by recommending diversified portfolios and managing risk according to your retirement goals and risk tolerance.

✓  Tax Efficiency

The report emphasises the importance of managing your taxes during the accumulation and retirement phases.

By engaging a financial adviser, you can leverage tax-efficient strategies, such as transition-to-retirement income streams or making use of concessional contributions. This can significantly reduce your tax liabilities both before and after retirement, helping to stretch your superannuation savings further.

✓  Managing High-Balance Accounts and New Tax Implications

ASFA and Treasury estimate that 80,000 people will be impacted by the proposed tax on superannuation balances over $3 million.

If you are an individual with a high superannuation balance over this threshold, the new newly proposed Division 296 taxes will have some impacts on you if they become law.

If this happens, a financial adviser can provide critical tax planning strategies to help mitigate the impact of these changes.

✓  Superannuation Gender Gap and Financial Advice

Unsurprisingly, women face unique challenges in superannuation due to lower average balances and time out of the workforce for caregiving.

ASFA’s data shows that women held 43.4% of total superannuation assets in 2022, up from 41.9% in 2018, but the gap is still significant.

Financial advisers can play a vital role in helping women catch up through strategies such as salary sacrificing, government incentives like the Low Income Superannuation Tax Offset (LISTO), and ensuring women receive super contributions on paid parental leave.


Contact our Financial advisers to support your retirement today

While Australia’s superannuation system provides a solid foundation for retirement savings, engaging a financial adviser helps maximise the benefits.

Whether dealing with market volatility, addressing the gender gap in superannuation balances, or navigating tax and contribution complexities, advisers offer critical value. By working with an adviser, you can better position yourself for a secure and comfortable retirement.

Contact us for an initial obligation-free chat to learn more, including how you can benefit from our Wealth Projections process where you’ll gain clarity on financial strategies that make most sense to your situation, while supporting a worry-free retirement.

Email us at team@tagfinancial.com.au or give us a call on 03 9886 0800.

 


Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2024. Please do not reproduce without the expressed written consent of the author.