More than four in ten Australians believe they need more than $1 million in superannuation to retire comfortably, well above the actual benchmark that the Association of Superannuation Funds of Australia (ASFA) says is adequate.
New ASFA polling found that 42% of respondents believed $1 million was necessary, while ASFA's Retirement Standard benchmark put the figure needed for a comfortable retirement at $730,000 for a couple and $630,000 for a single person.
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Retirement funding needs inch higher
ASFA also said the amount of superannuation needed for a comfortable retirement had increased from the previous quarter.
ASFA said:
This quarter's ASFA Retirement Standard budgets show that homeowners aged 65 and over now need $78,566 annually for a comfortable retirement as a couple, and $55,923 for a single, increases of 1.5 per cent and 2.0 per cent from the previous quarter, respectively. The overall CPI increased by 1.5 per cent over the same period.
ASFA Chief Executive Officer Mary Delahunty said inflation was at the forefront of many people's concerns about having enough income in retirement.
When households really feel the pressure of grocery, petrol, energy and other bills keep climbing, people naturally assume that retirement will cost a fortune. But the reality is that retirement generally costs less than working life. Retirees pay no tax on superannuation pension income after 60, most own their home outright, work-related costs disappear, and concessions reduce the price of energy, medicines, transport and council rates.
Housing crisis taking a toll
ASFA said the housing affordability crisis appeared to be weighing on the minds of young Australians, with many anticipating they will still be renting or paying off a mortgage in retirement.
ASFA said:
Among 25 to 34-year-olds, 51 per cent believe they will need more than $1 million in today's dollars to retire comfortably, and 23 per cent believe they will need more than $2 million. The figures are similar for 35 to 49-year-olds, at 52 per cent and 22 per cent respectively.
Ms Delahunty said the assumption that people would own their own home by the time they had retired seemed less of a given.
She added:
House prices have diverged significantly from wages over the last two decades, and many people now expect to carry rent or mortgage payments into retirement. It makes sense that they believe they will need much more in super than earlier generations did. Homeownership is an important aspect of dignity in retirement, alongside the financial security that comes from retirement savings. Addressing the housing affordability crisis, so that we start improving access to homeownership for younger generations of Australians, is a crucial public policy goal.
For those wishing to top up their superannuation, there is still time to make a tax-effective contribution before the end of the financial year.
