The $1 Million Superannuation Retirement Myth

Do you worry about superannuation? If you’re nearing retirement, chances are it’s one of the biggest concerns on your mind. Maybe you’re convinced that you’ll need $1 million to retire comfortably. At least, that appears to be the conventional thinking.

But a new report, ‘Busting the $1 million retirement myth’, is challenging this long-held belief. What’s more, it argues that this behaviour is potentially harmful. Tom Garcia, head of AIST, explains:

‘[This] concern could encourage those approaching retirement to take on unnecessary risk. [Or it could] see them vulnerable to the next get-rich-quick financial scam’.

The problem for most, then, is trying to match expectations with reality.

If you think of $1 million as a benchmark, anything short of that comes across as a failure. But consider this: less than five in every 1000 Aussies hold more than $1 million in super. Most people never see anything approaching that figure.

In fact, the average superannuation payout today amounts to $160,000. Yet even this figure is boosted by larger super fund balances. The majority of retirees can expect payouts of $100,000 upon retirement. That’s far below the $1 million mark. But it’s a closer picture of reality than many are led to believe.

This emphasis on superannuation ignores the realities of retirement.

As AustraliaSuper’s Ian Silk says, super is only one pillar of retirement income. Age pensions and non-super savings are equally important income sources. If you’re like most other Aussies, you’ll end up drawing your income from at least two of these sources.

According to Mr Silk, these three pillars of income should support each other. But retirees should still feel encouraged to save more of their super. He explains:

What we don’t want is people feeling demoralised because [$1 million] is out of reach. [They shouldn’t feel discouraged] from taking more control of their super. [Putting aside savings helps] supplement the age pension and fund a better… retirement’.

Changing expectations may prove easier said than done. But the conversation needs to shift to lift anxieties over smaller super balances.

The good news is that super balances are set to rise over the coming decades. According to AIST, the average super payout in 2050 will be $500,000 in today’s dollars.

Until then, retirees may need to lower their expectations.

Mat Spasic,

Contributor, Markets and Money


PS: Most Aussie retirees rely on their superannuation to live out their dream retirement. But with fees and taxes, many lose out on thousands of dollars to mismanaged super funds every year.

In a special Markets and Money report, Vern Gowdie shows you there’s another way.

Self-managed super funds aren’t for everyone, but they could be for you. Vern takes you through the A to Z of SMSFs to help you decide if it’s the right option for you. In the report Vern shows you how SMSFs benefit your super tax position. And he’ll reveal which investments are tailor made for SMSFs.

To find out how to download his free report, ‘How To Know if a Self-Managed Super Fund is Right For You’, click here.

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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