(Spoiler – The answer is Today.)
Let us explain.
Retirement planning is something most Australians don’t really consider until they reach well into their 40’s and early 50’s. Even then, most people don’t educate themselves enough to be armed sufficiently for retirement. According to a survey of 2,300 people aged 40 – 75 years old by the National Senior Australia (NSA) group, only 37% could be considered “Financially Literate”:
This lack of literacy around retirement is a real problem as many Australians struggle with their finances in retirement. A study conducted by the University of Melbourne and Towers Watson investigated the income shortfalls Australians will face in retirement:
Shortfalls in Retirement
(Aged 40 - 64)
|Mean Consumption Shortfall($)||Mean Consumption Shortfall($)
|1. Super only||-27,871||-25,232|
|2. Super + Voluntary Savings||-27,510||-24,597|
|3. Super + Voluntary Savings + Age Pension||-11,644||-4,075|
|4. Super + Voluntary Savings + Age Pension + Other Asset||-4,992||+20,354|
The table above highlights this shortfall for Australians who rely on various sources of savings in Australia. As can be seen, those who rely solely on Superannuation will be, on average, $26,000 short per annum of what is required to live comfortably. Even after combining the age pension and voluntary savings, the average Australian will still fall $10,000 short per annum.
The right time
The question that needs to be asked is what is the right time to consider retirement planning – with so much going on in day to day life, sitting down and thinking about it seems like an impossible task.
One of the best times to start retirement planning is when the kids become financially independent – this is often due to the extra time that is often on one’s hand and the higher level of financial stability.
But even this might be too late – like we said at the beginning the answer is probably today; we are not advocating you start contributing more to super (it can’t hurt though) nor are we saying it’s time to start playing bridge and arrange that beach house in the Gold Coast or Florida (would be nice). However everyone, young and old alike can start doing a few small things to make sure they are in a better position in retirement:
- Know your super fees – a lot of people don’t even know what fund they are in or what fees they are paying. A small change in fees can make a huge difference in retirement (as we discuss here)
- Know your super performance – A lot of funds charge exorbitant fees and perform poorly – this sounds like a pretty bad deal to us.
- Choose the best fund – armed with your knowledge of performance and the fees you are paying it is time to shop around and find the best fund – switching super is 10x easier than most people think and can be done online.
- Right investment mix – make sure your super is in the right investment option for your situation.
Retirement planning, while not rocket science, is difficult and everyone can do with a helping hand. The problem is a financial planner might charge you anywhere from $2,000 – $10,000 for that hand. That’s why we are launching Plenty – to give more people, more help with their financial lives – find out more about us here.
 The benchmark living standard was determined by the Association of Superannuation Funds of Australia (ASFA).
The information contained on this page is of a general nature and may not be appropriate for your personal circumstances. You should obtain personal financial advice before acting on this information.