Superannuation has been getting a lot of air time lately. Should the government allow us to withdraw from our super to purchase our first home? Should we be putting more away than we are? And given that we are likely to live much longer than previous generations, will we have enough in the bank to last the distance?
This week the Australian Financial Review (AFR) published an article claiming that $1 million in super is not enough to live comfortably in retirement. The article was the most clicked on article of the day for the AFR which is an indication, I think, of how unsure people are about their own super.
Personally, I reckon telling people that $1m won’t be enough to retire on is fear mongering and counterproductive. A more helpful point to make, particularly for young people who are looking down the barrel at a working life that will be longer than any generation before them, is to give some serious thought to preparing financially for retirement even when it seems so far away. Throwing arbitrary numbers around that were picked out of thin air is not going to help anyone.
When it comes to retirement needs, no situation is the same. However as a bare minimum, people should assume that they will continue to spend around 60-70% of their pre-retirement income. For many people $1m in super would be ample. For others perhaps not. In either case, a two-pronged approach to financially preparing for retirement is vital, the idea being to build up your assets both inside of superannuation and outside of the superannuation environment as they both have different liquidity & accessibility.
It is VITAL that young people talk to a financial advisor about their super (and no, I’m not just saying that because I’m the Founder of a financial services firm!). This kind of maths is not something that should be worked out on your own. Instead, I strongly recommend that young people seek out financial advice from a trusted and qualified financial professional who will be able to devise an investment strategy tailored to your unique needs so that you can feel confident about your retirement.