Is Your Super Enough?

By Jason Fittler

"If you do not take care of your super, it will not take care of you."

The average Australian wage is $57,000 pa, lets assume that you receive this amount for 35 years from age 30 to age 65. Each year you would receive $5,130 super contributions, if you compound a return of 8% pa on this investments this would give you $880,000 in retirement. Adjusted for inflation of 3%, you would have the same as $312,000 today.

Could you retire today on $312,000? On an average return of 8% this would give you a pension of $31,000pa for 20 years. This is 45% below today’s average income. In short, yes you could live on it but your life style would suffer.

Many people believe that their super will take care of them in retirement, the simple fact is, if you do not take care of your super it will not take care of you. I hear a lot of arguing about Industry Funds verse Retail funds, the main issue is fees, industry funds are cheaper.

At the end of the day it is like two fleas arguing about who owns the dogs they live on. To enjoy your retirement you need to do more. Fees are irrelevant, net return and savings are important. To achieve the lifestyle you want in retirement you need to put more effort into your super, this means stop spending as much as you do and start saving.

To retire with the same as today’s average wage you will need $560,000 today dollars in your super fund. In 35 years you will need $1.5 million.

To achieve this you have one of two choices;

1.    Increase your super contributions from $5130 to $8700 pa. You could do this through salary sacrifice and save tax. In real terms this means salary sacrificing around $68 per week.
2.    Achieve a better overall return in your super fund, if you could achieve a net return of 10.55 as opposed to 8% you would achieve the required $1.5 million super in retirement.

If you did both you would end up with $2.6 million giving you a $92,000 income in today’s dollars, this is a 61% better income than what the average Australian receives now.

Message

Stop worrying about the fees you pay and start worrying about what advice you are getting. This advice was given to you for free, for those who listen you will have a great retirement. For those of you who understood, then seek and pay for advice you will have a far better retirement.

What sort of retirement will you have?

If you would like to learn more, give me a call on 07 4771 4577.