More Aussies retiring without enough savings to self-fund

It’s no secret that people are living longer than their parents or grandparents, so our retirement income needs to last us a fair few more years.

While there is no longer a fixed retirement age in Australia, most people choose to leave work around the time they become eligible for the Age Pension – 65.5 years old (67 in July 2023).

Currently the basic Age Pension is set at a maximum of approximately:

• $826.20 per fortnight for singles
• $1,245.60 per fortnight combined for couples

According to the latest Roy Morgan research, the number of people intending to retire in the next 12 months “is estimated at 439,000, a 6 per cent increase on the 2018 level of 414,000 and 11 per cent above the 2017 figure of 395,000.”

However, the savings levels of many of these Aussies are “well below” the recommended level to be self-funded, meaning they will likely be reliant on the age pension.

The Association of Superannuation Funds of Australia (ASFA) estimates that “an individual would need $545K and a couple $640K for a ‘comfortable retirement’”.

Roy Morgan found that the average gross wealth (total assets excluding owner-occupied homes) of intending retirees is $299K, up only 2 per cent over the last two years, from 2017 when it was $293K.

Although the average debt level for this group is currently only $27K, it does reduce their average net wealth to $272K, which is considered to be inadequate for self-funded retirement.

Roy Morgan’s conclusion is that these intending retirees will be relying on government benefits for some time.

How you can self-fund your retirement

There are a few ways you can stretch your retirement budget to make your income last longer or boost your nest egg now.

1. Make a long-term budget

It may be morbid to think about, but the average life expectancy for Australian men is 80.9 years, and 84.8 for women. If you’re a woman intending on retiring at, say, 65 years old, you’ll need to work out a budget for your nest egg that will last at least 20 years, hopefully more.

1. Look for a super fund with low fees

Aussies pay a number of different super fees, including membership fees, administration fees, management fees, performance fees and many more. If you’re a fair few years away from retirement, find out if you’re paying too much by checking your superannuation statement, and compare this against other funds to see how yours stacks up. Recent RateCity research found that making the wrong choice with your super could cost you more than $100,000.

1. Diversify your investments

If you’re in a financial position where you can invest, it’s worth considering diversifying your assets so that your money can grow over time. This could be through investing in shares, property etc.

By having a diversified investment portfolio, you can work towards growing your capital and keep on top of growing inflation levels. While $20,000 hidden under your mattress may have been a lot of money 30 years ago, it would barely last a year for the average Aussie today. Investing in one or more assets can help your money to keep pace with inflation.

1. Work part time

Australian Securities and Investments Commission (ASIC)’s MoneySmart website recommends part time work as a good option to ease into semi-retirement before fully retiring, or to keep extra income coming in.

While you may feel this defeats the whole purpose of retirement, ASIC advises that there are some benefits: 

• “Conserve your super balance – as you will be earning an income, you won’t need to draw as much from your super and can continue to contribute to the balance.
• Tax incentives – if you are aged 55 or over you may be able to take advantage of a transition to retirement strategy, which allows you to supplement your pay by drawing down from your super after you have reached preservation age. You pay no tax on your super income from age 60 and your employer will continue to top up your super.”

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