Survey reveals 45 per cent of Aussies believe they will need more than $1 million to retire

It’s the magic number thousands of Australians are striving towards – but it turns out the real goal could be even further out of reach.

Almost half of us are convinced we will need more than $1 million in the future, but experts are warning the true figure could be even higher – and tougher to attain.

It’s no secret Australia’s cost of living is high, making it tough for many of us to make ends meet right now, let alone prepare for the years to come.

And according to a new survey, retirement is now one of the biggest financial pressures weighing on Australian minds.

Every two years, news.com.au runs its Cost of Living Survey to find out our readers’ biggest household money worries.

The results of the most recent survey are in, and news.com.au has now kicked off the Money Project, revealling the biggest money challenges facing Australian households and offering practical help on how to get your finances in shape for 2020.

According to the latest survey, retirement has jumped to the top of the list of things respondents are saving for, up from fourth position in 2017.

Although, retirement has gone from the “most intimidating” future cost in 2017 to the second most in 2019 behind mortgage payments.

Nearly two-thirds of respondents think they will need upwards of $750,000 to retire, with 45 per cent believing they will need more than $1 million.

According to the Association of Superannuation Funds of Australia (ASFA), the country’s peak policy, research and advocacy body for Australia’s superannuation industry, at the moment, a single person aged around 65 would need just over $28,000 per year or a couple just over $40,000 to have a “modest” retirement.

That would allow a lifestyle better than what you’d have if you relied purely on the age pension – but still means you would only be able to afford fairly basic activities.

But if you want a “comfortable” lifestyle – with the occasional overseas holiday and the ability to dine at restaurants and buy nice things – you will need just above $44,000 per year, or more than $62,000 a year for couples.

Another popular measurement for how much cash you’ll need is the two-thirds rule – the idea you will require two-thirds of your final year’s salary per year to maintain your lifestyle.

But according to Griffith Business School professor Dr Robert Bianchi, the reality is even harsher.

It’s impossible to know how long you’ll live – or the magic number you’ll need to retire. Picture: iStock

And he said the question of how much you’ll truly need is almost impossible to answer, as it depends on each individual person’s situation, as well as how many years they will end up living – a problem worsened by our ever-increasing longevity thanks to medical and technological breakthroughs.

Meanwhile, the Australian Institute of Health and Welfare reports an Australian boy born in 2015–2017 can now expect to live to the age of 80.5 years while a girl would be expected to reach 84.6 years, making Australia one of the top nations for life expectancy in the world.

Dr Bianchi told news.com.au it was important to err on the side of caution and save more rather than less, because the future costs you might end up facing – like aged care and medical bills – are such a great unknown.

“It’s very difficult to give a straight answer regarding how much you need to retire because it depends on so many factors, so I tend to err on the side of caution and say you need more money rather than less,” Dr Bianchi said.

“Returns are shrinking and bond yields are falling – we know retirees love term deposits in banks, but in this low return, low interest rate environment, if anything you need even more money saved to generate the same level of income at retirement.

“What is becoming clear is that we are all living longer and with that longevity comes the risk you will outlive your savings, and with the uncertainty of aged care in Australia, who will look after you when you hit 85?”

And Dr Bianchi said funding retirement was also further complicated by generational differences.

For example, most Baby Boomers started their careers before superannuation was compulsory, although those that bought property have probably grown their wealth through the real estate boom.

Meanwhile, many members of Gen X were somewhere in the middle, while Gen Y will have compulsory super for their entire working lives – but face being locked out of the property market due to our sky-high property prices.

BULK UP YOUR SUPER

Thankfully, there are ways to boost your super right now to give your future self a helping hand.

Christina Hobbs, CEO of Verve Super – Australia’s only super fund dedicated to women – shared some of her top tips, and told news.com.au it was never too late to make sure your superannuation was working for you.

Firstly, she recommended checking on your employer contributions.

“We often just ‘set and forget’ our super fund and hope that our employers are doing the right thing by us. Yet Australian are ripped off by their employers every day – in fact 2.8 million Australians are underpaid in super,” Ms Hobbs said.

“Make sure you login and check on your super and make sure that your employer is paying you the super you’re entitled to.”

Next, consider making extra contributions to your super before the end of financial year to boost your retirement savings and save on tax.

“These concessional contributions allow you to contribute up to $25,000 a year which is tax deductible,” Ms Hobbs said.

She also recommended taking advantage of “free government money”.

“Depending on your income, you could be eligible for a government non-contribution into your super account of up to $500 a year when you make personal (after-tax) contributions to your super fund. If you make additional contributions, you could also be entitled to a tax refund,” she said.

You should also consolidate your super to save on annoying fees.

“If you’ve had part-time or casual jobs, make sure you know where all the super contributions made by your different employers have gone,” Ms Hobbs said.

“Consider consolidating your super into one account to save on fees – it’s easy and can save you money in the long term.”

And finally, she urged Aussies to consider putting their tax refunds to good use by making a voluntary super contribution.

“If you make extra small contributions into your super account now, it has years to grow and to benefit from compounding interest – or interest on your interest – which can lead to a stack more super come retirement.”

Another option is to take advantage of platforms like Super-Rewards – a rewards program that earns you cash as you shop and puts that cash directly into your super to boost it.