Super is a sure thing

Recent research by AMP shows close to 60% of Australians would prefer to stay in the workforce for longer rather than cut back their expected standard of living in retirement.

But despite intentions to work well into our 60s and even 70s, these plans don’t always work out. Many seniors are forced out of the workforce earlier than expected.

As a guide, the Australian Bureau of Statistics found Aussies plan to hang up their work boots, on average, at about age 65. But in practice, the average retirement age is closer to 55. That’s because many people enter retirement prematurely due to ill health or disability.

Relying on an inheritance can be equally shaky.  I’ve come across studies showing that about seven out of ten Australians expect to leave an inheritance. That leaves one in three seniors planning to ‘spend the kids’ inheritance’.

Super, on the other hand, is something we have control over. We can choose how it’s invested, the amount we pay in fund fees, and how much we contribute (within certain annual limits).

Our super savings are also lightly taxed, making it a very appealing investment environment for retirees.

The catch is that many Australians don’t know how much they have accumulated in super. One in ten workers can’t even name which fund their super is with.

But it is worth getting to know your super better. After all, it could be your second biggest investment after the family home.

I realise we often come across various reports about the level of super savings needed to fund a decent retirement, and in some cases these figures can seem alarmingly high. It can make it tempting to toss in the towel and hope your retirement income simply works itself out.

What is often overlooked though is that the amount you need in super will depend on your personal retirement goals. So instead of working towards what may seem like an unachievable target, a simpler approach may be to tuck a bit extra into your super on a regular basis – either through salary sacrifice or out of pocket contributions.

By starting early, the beauty of this strategy is that the magic of compounding investment returns will do a lot of the heavy lifting, helping to grow your retirement savings over time.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.