The Reality of Retirement: Why Many Australians Need More Than Just Super

As retirement approaches, many Australians face the question of whether their super balance will be sufficient to support a comfortable retirement for the next 20 years.

Recent research from the Super Members Council of Australia has revealed some alarming statistics:

When they reach their life expectancy age, 80% of men and 90% of women have no super left. This highlights the need for retirees to seek strategic financial planning to ensure a stable retirement.

Adding to this challenge, more than 40% of workers are now retiring with mortgage debt, a significant increase of 16% over the past two decades. This means that many retirees are not only relying on their superannuation but also facing the burden of ongoing debt, making it even more critical to have a robust financial plan in place.

Insufficient Super Balances

A study by Innova Asset Management using APRA data highlights the problem even more. It found that around 60% of MySuper accounts owned by pre-retirees (aged 60 to 64) have less than $100,000 saved. This amount is not nearly enough to support a comfortable retirement for two decades, meaning many retirees will have to rely heavily on the Age Pension.

Given these statistics, it is evident that a significant number of Australians need to seek financial advice well before retiring. This advice is crucial for boosting retirement savings and exploring alternative ways to enhance retirement income.

Investing Through Retirement

Staying invested in a well-balanced mix of assets can provide the best chance of achieving retirement goals. Your super needs to grow to keep up with inflation and the rising costs of living.

With retirements potentially lasting over 30 years, having a long-term investment strategy is essential.

But as we age, our tolerance for investment risk typically decreases. Younger individuals can afford to take more risks as they have time to recover from potential losses.

However, as retirement approaches, the focus shifts to preserving wealth and ensuring a steady income stream. Despite this, it’s important to maintain some exposure to growth assets to keep up with inflation, given the increased life expectancies.

Optimal Investments for Retirement Income

Retirees should consider investments that offer stability and income generation, such as:

– High Dividend Paying Australian Shares: These include bank shares and mining companies, known for their reliable dividends.

– Credit, Mortgage & Bonds Funds: These funds offer attractive yields, especially as interest rates rise.

– Term Deposits and High-Interest Savings Accounts: With recent increases in interest rates, these options have become more appealing due to their low risk and steady returns.

Credit and Mortgage Funds

Mortgage funds pool investors’ capital to lend to corporates and property developers, offering yields from 6% to 12% p.a. However, higher yields come with higher risks, particularly in property development.

Australian Shares

Australian shares are renowned for their high dividend yields, typically around 4.2%, plus additional income from franking credits. Despite stock prices’ inherent volatility, the potential for long-term capital gains makes them a valuable part of a retirement portfolio.

Retirees Should Seek Advice

The statistics we’ve discussed show the importance of seeking the right advice from a suitable financial planner to boost your superannuation savings well before retirement. This might also mean considering more aggressive investments to ensure a comfortable retirement. Unfortunately, this goal is still out of reach for many Australians.

At Collective Wealth Advisers, we’re here to guide you through every step of your retirement planning journey. We know that change is a constant, and we want to help keep your financial goals on track and make the best decisions possible for your retirement and investments.

Contact us today to learn how we can help you maximise your investments and achieve your retirement goals.