Retirement goals: workers cut back spending to boost superannuation

Australians have cut back on discretionary spending during the cost-of-living crisis but are also looking to boost their nest eggs as an uncertain outlook plays into retirement planning.

Australians are cutting back on spending but putting more into superannuation.

Australians have cut back on discretionary spending during the cost-of-living crisis but are also looking to boost their nest eggs as an uncertain outlook plays into retirement planning.

Inflationary pressures and higher rates have crunched household budgets, with 85 per cent of Australians now more cautious about spending, according to a new report from Equip Super.

Even as they tighten their belts, two out of three workers plan to put more into their super through voluntary contributions in response to the challenging economic climate, the survey by the $32bn super fund found.

“It’s completely understandable that everyday Aussies are feeling the pinch of rising costs,” Equip Super head of advice Paul Stocker said.

“Over the past several years we’ve navigated through unprecedented times, from the far-reaching impacts of the pandemic to the surge in inflation and interest rates, all of which have undoubtedly impacted household finances.

“While it makes sense to trim some spending to alleviate immediate financial pressures, it’s crucial to recognise the enduring importance of maintaining a focus on long-term financial security. Even small super contributions can have a positive impact on retirement, as the value of those contributions compounds over time,” he said.

A third of workers are already topping up their super with extra contributions, as others focus more on paying down debt, including home loans.

Adding to their nest egg isn’t the only action workers are taking, with financial advice becoming increasingly popular. Equip has seen an increase in members seeking advice from the fund.

“Year on year we’ve definitely seen more activity in terms of people coming to our door, from our member base in particular, and from external as well,” Mr Stocker said. “We’ve seen an uplift of inquiries, and the broader conversation is around how much (super) is needed or what retirement might look like (depending on savings).”

More than half of those surveyed said they would use financial planning services from their super fund if they were available.

The survey also showed a shift in perception among working Australians on their retirement needs, with more than half putting a greater importance on their super in light of rising living costs and inflationary pressures.

And while a third are setting retirement goals, this was surprisingly skewed to Gen Z, with 42 per cent of this cohort already setting out their retirement plans.

The findings come as recent research from Colonial First State found that just one in three Australians get to retire on their own terms, with most pushed out of the workforce due to health issues or redundancy. But “advised” workers typically fare better and are twice as likely to retire at a time of their own choosing.

Too many workers don’t consider their retirement needs early enough, with many waiting until their 60s before they really start setting out a plan.

Olivia Maragna of Aspire Retire Financial Services says there are many benefits from seeking retirement advice at a younger age.

To maximise the benefits of retirement planning, workers should get financial advice in their late 50s, she said.

“I might see a client who’s 64 and I’ll say I wish I could have seen you four years ago because we’ve missed out on certain strategies, which would have put you in a much better position,” Ms Maragna told The Australian.

How and when to start drawing down on savings is another factor to keep in mind.

“It’s not necessarily what you have in retirement that matters, it’s how you actually start drawing down on it, because those early years are the big spending years,” Ms Maragna said.

Originally published as Retirement goals: workers cut back spending to boost superannuation