Cost of retirement climbs as super struggles to keep up

The amount needed to set aside for a comfortable retirement continues to grow, as Finder indicates the figure is approximately double what Australian retirees will actually have.

A Finder survey of more than 1,000 respondents has uncovered that $641,223 is the number that Australians predict they will need to save in superannuation when they stop working.

This figure is roughly twice the size of what an individual’s super balance will actually look like once they reach retirement. 

According to the Australian Taxation Office (ATO), the average Australian male aged between 60 and 64 has $402,838 in super, while women the same age have just $318,203.

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For someone to achieve the near-$650,000 retirement balance, they would need to earn an income of $33,397 each year.

This is based on a retirement age of 64 and an average life expectancy of 83 in Australia. 

Earlier this month, the Association of Superannuation Funds of Australia (ASFA) reported figures that were lower than this, it found that retirees will need $595,000 in retirement if they are an individual and $690,000 for a couple, showing that this number continues to grow. 

Sarah Megginson, personal finance expert at Finder, commented: “Thousands of Aussies are facing a huge deficit when it comes to the size of the ‘nest egg’ they think they’ll need to retire with and the amount they’ll actually have.

“Considering the average life expectancy is rising in Australia and the cost of living has risen dramatically, your retirement savings will have to stretch even further.”

Finder also highlighted that older Australians are marginally more conservative. Baby Boomers estimated they will need a super balance of $545,548, compared to $751,813 for Generation X.

Moreover, the average Millennial says they will need $628,191 to comfortably retire, while Generation Z predicted $594,909.

Megginson encouraged fund members to examine whether their super fund is offering the best possible value for their savings.

“It’s really easy to forget about super because you can’t access it now, but it’s actually your money, so make sure it’s working in your best interests,” she said.

“Don’t get stuck in a fund charging exorbitant fees and check that you’re in the right fund for your risk profile. Also make sure you consolidate your funds into one – otherwise you’re paying extra fees for no reason, which means less money for you at retirement age.”