How Much Super is Enough? Understandably this is a question our people get asked a lot and it’s a challenge to answer, but worth unpacking.
Our Australian retirement system is based on three pillars: a means-tested Age Pension, compulsory superannuation savings, and voluntary private savings both inside and outside the superannuation system.
The question of how much super do you need has to take into account other assets, lifestyle, spending patterns, and unknowns such as variations in how long we all live — it’s not so straightforward.
If you own a house or have it substantially paid-off close to retirement, that’s an important step in security. Homeowners have potential locked-up value which could be accessed via downsizing or other means.
Some are fortunate enough to have other additional significant assets.
For the many Australians who are renting, and are close to retirement, the situation is difficult.
While the property boom has increased the value of homeowners and investor assets, the sheer demand for property, particularly regionally, has seen vacancies dry up and rents increase dramatically.
This has severe implications for those renting and surviving on the Pension as the primary or only source of income.
There are parts of Australia that are still relatively affordable to rent, but the distances from infrastructure, friends and family are considerations.
The Government does provide some rental assistance based on eligibility, but it’s a nominal amount compared to the costs of rental.
In addition to the normal variations in personal wealth, people in transport have particular issues to consider.
The physical nature of driving for many years or working in a manual capacity means eventually injury or time take a toll on the body.
Our insurance claim records for the past financial year show the three highest claims areas are:
• Musculoskeletal (54.4 per cent)
• Mental health (8.2 per cent)
• Spinal Injuries (8.2 per cent)
I highlight these statistics as they tell a story of why many people in the T&L industry have to retire earlier than they would have hoped.
The Age Pension kicks in at 67, so the gap between when people can physically work or have to stop could be a number of years.
People in management or logistics may also find themselves subject to technology or skills deficits which could also result in an earlier retirement.
Clearly this has implications for those who must fund a ‘gap’ between stopping work and receiving an Aged Pension. That’s a big hole to fill and can drain super quickly.
Even for those who are relatively well off and have substantial savings in and outside superannuation, knowing how much do you need before retiring should consider a number of variables:
• Your lifestyle expectations
• Your spending patterns
• Likely longevity in age (an impossible question).
For some people, they can live on a relatively modest budget, while others have different expectations such as overseas holidays, fine dining or other luxuries.
Some people are good at delayed gratification, others not so. The way you invest is also another key factor, being too conservative or playing the markets can have different risks.
Which means there is no simple answer. We do have guidelines based on normal costs of living from a modest living to those who want a more ‘comfortable’ lifestyle.
But the reality is that each person’s situation is so different that online tools may give a false sense of hope, or despair.
Living on the Age Pension is a challenge if it’s the only source of income, even if you own a home.
For most Australians, a combination of the Age Pension, in full or part, supplemented with a superannuation income stream that will provide enough income to see them through retirement. No matter what your current circumstances, it’s worth considering getting financial advice from a qualified person who has your best interests at heart. They will need to understand your individual situation, your hopes, financial situation, and lifestyle factors.
At TWUSUPER, we have a range of options to suggest if you want to speak to someone or we can also offer workplace education sessions that can cover the basics, as well some strategies to grow super.
Finally, I should mention insurance death (life cover) and permanent disablement cover which is included with most superannuation funds to help protect individuals and families.
Our insurance cover is tailored for transport people and covers all occupations, which is not the case with many policies. It’s an important topic, so please visit our website if you are not aware of the implications for you or your people.
After all, none of us knows what’s ahead, but we can plan and balance the needs of today against those of the future.
Frank Sandy, CEO of TWUSuper, has been with the fund since 2005. His previous roles have involved managing both finance and human resources. Frank is a CPA and has a Degree in Business Studies in accounting as well as a wealth of experience in finance and superannuation.