The Melbourne Cup is just around the corner, and while millions of Australians will have a punt on the race that stops a nation, it seems just as many of us are taking a gamble with our retirement nest egg.
The latest ‘Your Super Future’ report by ING DIRECT and the Financial Services Council (FSC) found one in two Australians plan to use additional income sources like property and employment, to supplement their super savings in retirement. One in nine workers are relying on an inheritance to help fund their retirement.
While super may seem confusing and ever-changing, it is far more of a sure thing in retirement than many of these options.
Despite intentions to work well into our 60s and even 70s, many seniors are forced out of the workforce earlier than expected – often due to ill health or family reasons.
Relying on an inheritance can be equally shaky. Previous research by HSBC found 69% of Australian retirees expect to leave an inheritance. That leaves one in three seniors planning to ‘spend the kids’ inheritance’.
Super, on the other hand, is something we have control over. We can choose how it’s invested, the amount we pay in fund fees, and how much we contribute (within certain annual limits).
Our super savings are also lightly taxed, making it a very appealing investment environment for retirees.
The same ING DIRECT/FSC report found that around one in three workers don’t know how much they have accumulated in super. This is surprising because for many people their super is likely to be their second most valuable asset after the family home.
I realise we often come across media reports about the level of super savings needed to fund a decent retirement, and in some cases these figures can seem alarmingly high. It can make it tempting to toss in the towel and hope your retirement income simply works itself out.
What is often overlooked though is that the amount you need in super will depend on your personal retirement goals. So instead of working towards what may seem like an unachievable target, a simpler approach may be to tuck a bit extra into your super on a regular basis – either through salary sacrifice or out of pocket contributions.
By starting early, the beauty of this strategy is that the magic of compounding investment returns will do a lot of the heavy lifting, helping to grow your retirement savings over time.