Superannuation balances: will you have enough to retire well?

Superannuation balances fall short for many new retirees, but the news for younger workers is better. See how your super measures up.

People wanting a comfortable retirement are being urged to check their superannuation balances after a fresh analysis found a majority of Australians would not have enough if they stopped working today.

New figures from the Association of Superannuation Funds of Australia show the gap between median super balances at age 65 and the amount needed for people to retire comfortably at 67 exceeds $300,000.

However, younger workers are much better placed to have enough money thanks to employers’ compulsory super heading to 12 per cent of wages by 2025, while higher incomes play an increasingly important role.

ASFA found someone on a $90,000 wage could start saving 8-10 years later than a worker earning the median wage of $65,000 and still reach the $595,000 superannuation balance required to deliver a comfortable retirement income of $50,207 through a mix of super and age pension.

The analysis shows a 30-year-old today requires a current super balance of $68,000 if earning $65,000, but only $8000 if their wage is $90,000. For a 40-year-old the balances required are $162,000 and $113,000 respectively, while a 50-year-old should have $284,000 if their wage is $65,000 or $249,000 if their wage is $90,000.

People aged 65 – just two years before retirement age – require a super balance above $535,000, but new figures show median balances for this age group are $215,000 for men and $191,000 for women.

“Don’t panic if you are behind the average,” ASFA deputy CEO Glen McCrea said.

“That’s fine – not everybody can be average by definition,” he said.

“Having a higher wage will mean that your contributions are higher because it’s 12 per cent of your wage, but this analysis shows that having some dignity in retirement is not impossible for people on lower wages, but what it might need is a bit more government support to help those people.

“Because we are going to 12 per cent, future generations – even on modest incomes – are going to get close to comfortable.”

Mr McCrea said it was easier for couples to retire comfortably because they could share household expenses. ASFA’s calculations show a couple requires a combined super balance of $690,000.

He said people whose balances were behind target could consider making voluntary contributions, engaging with their super fund, and examining super’s tax benefits.

“Every dollar extra in retirement is something you can do to enjoy your life.

“Moving to 12 per cent was the game changer. However, see still that when people have broken work patterns that can have a material impact on retirement.”

Checking your super balances will show if you are on track. Picture: iStock

ASFA wants compulsory super extended to paid parental leave to help close the gender gap in balances, a $5000 “super baby bonus” for women and an extension of the low-income superannuation offset.

MBA Financial Strategists director Darren James said seniors’ super balances were often too low because they did not enjoy a full career of compulsory superannuation.

“A lot of people retiring at the moment didn’t have super to start with, and when they did start it was only 3 per cent,” he said.

Mr James said the shift to 12 per cent compulsory super would not solve everyone’s retirement savings gap “but it will get them a lot closer”.

He said people could also make extra tax-deductible super contributions and use incentives such as the co-contribution for low and middle income earners.

“It could even be just tax return money – small amounts can make a big difference over the long term.

“One of the most misunderstood things with super is what it gives you at the end. Until you sit down and work through it, you don’t know … have a good look at what sort of income it will give you and what you need.”