Why $1 million in your super won’t be enough

Five years after the GFC, it’s boom, boom, boom.

Take the US market, where stocks surged last week on the news that the US Fed won’t wind down its $85-billion-a-month economic stimulus program, AKA “quantitative easing.”

Some 600 US stocks hit 52-week highs on the day that news was announced… prompting one of my Foolish colleagues to quip, “The nice thing about American stocks is that they’re starting to make Australian stocks look cheap!”

That fellow Fool isn’t the only investor remarking on the market highs.

Warren Buffett, the “Oracle of Omaha” and the world’s greatest investor, has said he’s having trouble finding bargains.

Australian stocks have hardly had a tough go of it lately, however…

The ASX has seen six straight weeks of gains! And this week may well make for seven.

Helping drive the bull market is the latest economic data released from China, apparently so positive that it’s “forcing investment banks to raise their growth forecasts” and even “surprising the pessimists” according to The Australian Financial Review .

But for all these exuberant headlines, one of the biggest stories around – the one that’s most significant for long-term Australian investors like you and me – is going all but unnoticed.

And it’s far from good news!

Below, I’ll dig into this news and what it means for your financial future.

Australian workers set for a “harsh reality”?

Consulting firm Deloitte recently released a report estimating that the Australian super pool will rise to an eye-watering $7.6 trillion in 2033, from $1.6 trillion today.

That sure seems like a lot of cash…

Yet, while this projected growth in retirement savings is nothing short of impressive, it still belies a “harsh reality.”

As The Sydney Morning Herald has reported…

“Increasing life spans, the effect of the GFC on superannuation accounts and the fact that the superannuation guarantee started only in 1992 is leaving older workers underfunded .”

What’s more, “most of those retiring in the next 20 years will not have the lifestyle in retirement they are seeking. They will have to work for longer and increase contributions to their super if they are to afford a comfortable retirement.”

Even younger workers will be $500,000 short!

Australia’s superannuation retirement system may be the envy of the developed world, but there’s clear proof that few of us will be able to rely on superannuation alone.

A harsh reality indeed!

Even younger workers are up against it. A 30 year old making an average salary of $60,000 annually will have an estimated $1.1 million by retirement at age 65.

A cool $1.1 million! You’d be forgiven for thinking that looks like a great deal of money indeed. Unfortunately…

The sad news is that $1 million in super probably won’t be enough. In fact, it falls nearly half a million dollars short, if you want to enjoy your retirement.

Without worry, with the ability to travel and truly relax after decades of hard work…

(Exactly the sorts of things you’d like to be doing in your retirement, after all!)

The Deloitte report went on to detail that, to have a comfortable retirement, “a 30-year-old male would need retirement savings in 2048 of $1.58 million and a female would need $1.76 million.”

Yes, not only are women structurally disadvantaged by our retirement savings system, they also need more by retirement because they’re likely to live longer!

Fools, the bottom line is, whether you’re retiring soon or still have 30 years more to work, your super alone probably isn’t going to cut it.

Now we can sit on our hands and worry about all this, or we can use our good sense and do something about it…

Your action plan as a Foolish investor

What to do? It’s simple enough. Live below your means. Save more. Invest more! Share what you’ve learned with your nearest and dearest.

And – I’d humbly suggest – position yourself for years of market-beating returns by buying shares of Australia’s very best companies.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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