Gen Xers, it’s time for some superannuation housekeeping

Gen X has had a front-row seat to plenty of economic turbulence.

From witnessing the global financial crisis early in their careers, to walking the tightrope of virtual work and parenting in the pandemic, this group of Aussies know full well there is no such thing as certainty when it comes to finances.

Many Gen Xers, now in their 40s and 50s, have also become part of what some demographers call the ‘Sandwich generation’, responsible for providing financial and emotional support to both their children and their ageing parents. Throw in soaring mortgage repayments, and it’s easy to see how some in this age bracket might only view retirement as a far-off illusion.

But superannuation experts say this is precisely the right season of life to fantasise about your dream retirement, then do some simple fact-checking to make sure you’re on track.

Many Gen Xers, now in their 40s and 50s, have also become part of what some demographers call the ‘Sandwich generation’.Credit: Aresna Villanueva

At this point in your career, you probably have a sizeable asset to protect: Australian Taxation Office (ATO) figures show that men aged between 50 and 54 have a median super balance of $162,146, while women of the same age have $111,063.

Tune out the noise and focus on your goals

“What is a good super balance?” generates more than 500 million Google results – but that question might not be much use if you don’t know your specific retirement goals.

While the Association of Super Funds Australia (ASFA) outlines a retirement standard that estimates how much you’ll need after finishing work, there is no “one-size-fits-all” number, says financial adviser and Women on Wealth co-founder Michelle McKindlay.

The first step that Australians in this age group should take is getting very clear on their personal financial needs in retirement, she says.

“Realistically looking at everyday expenditure needs and wants is critical. Factoring in how inflation will affect this over time and planning for recurring larger expenses such as paying off any remaining debts on homes, holidays and replacing items like vehicles will also ensure they can be well informed.”

Once you’ve considered your ideal scenario, you can then start working out whether your current balance is growing appropriately to fit your needs.

This process could involve getting professional advice, McKindlay says, but you can also start to sketch this out yourself.

“For those who prefer to work through it themselves there’s some great calculators and resources available online with most super funds, and Moneysmart, that can assist.”

Tidy up

Now’s also the perfect time to clean up any lingering or forgotten accounts.

“If you have multiple super accounts, you could consider consolidating them into one fund, to avoid paying several sets of fees. Having just two super accounts can mean a typical person misses out on as much as $51,000 in retirement,” Super Consumers Australia chief executive Xavier O’Halloran says.

Don’t forget to check what insurances you’re paying in an account before you roll it over.

“Be mindful that exiting funds and consolidating may affect your insurance cover so it’s important to check the ramifications first,” he says.

Mind the gap – but know you can catch up

By the time you approach your 40s and 50s, the effects of the gender superannuation gap may be obvious in your own account.

Professor of finance at Griffith University, Robert Bianchi, says there are several reasons for the gap in median super balances between male and female savers. The gap widens as people move from their 20s to their late 50s.

“Females, on average, tend to be caregivers in their respective families which means they tend to take time off or exit the workforce to care for vulnerable family members, such as elderly or sick parents, sick children and more,” he says.

If you check your balance and realise it’s not where you want it to be, the good news is you have one or two decades left to close the gap.

This could include considering making additional salary sacrifice contributions to your fund, or researching “carry forward” provisions that could let you make extra payments to your account in one financial year if you haven’t reached contributions limits in previous years.

“It’s a great time to look at how different superannuation contribution strategies can move your investments into a tax-advantaged environment, where you may be paying less tax within super than if you were to invest in your own name,” McKindlay says.

Cover your bases

Now’s also a good time to review the insurances you’re paying for within super and whether these are working for you, McKindlay says.

“Whilst insurance can be a wealth protector and it’s certainly needed for most households at some point in time, it can also cause a lot of wealth erosion, particularly as you get older.”

Doing a quick stocktake of what you’re paying for within your fund can help clarify what you’re covered for. It can also get you thinking about whether it makes more sense to hold some of your insurance policies outside of superannuation.

“It’s a complex area, so make sure you check the product disclosure statements and ask lots of questions,” McKindlay says.

This is the fourth part of our six-week Gen Super series, which takes an in-depth look at what to do with your superannuation at each age, from Gen Alphas just starting in their first jobs to Baby Boomers, who are just starting to retire – and beyond.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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This story was created in partnership with Colonial First State. The content is independent of any influence by the commercial partner.