| Will my Super be Enough? |
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Superannuation has, for many years now, been Australia’s preferred vehicle for retirement saving. The introduction of the Superannuation Guarantee system in 1992 heralded access to the superannuation system for many workers for the first time. With over 15 years of Superannuation Guarantee under the belt, and with compulsory contributions now at 9% of salary or wages, many people are starting to build up reasonable superannuation savings. Whilst there is agreement that 9% is a respectable level of superannuation contribution, it is generally accepted that this will not be an adequate level of contribution to enable Australians to support a comfortable lifestyle in retirement. To help explore the adequacy of the 9% Super Guarantee contributions, let’s look at a simple example. Simon starts working at age 25 and earns $35,000 pa. His employer contributes 9% of salary to a super fund. Simon’s salary grows by 4% per annum and his super fund produces an average investment return of 7½% per annum after deducting fees and taxes. In 40 years time Simon reaches age 65, his superannuation savings will have grown to a respectable $968,163. If we assume that inflation runs at 4% pa for Simon’s working life, $968,163 in 40 years would be worth around $297,000 in today’s dollars. So, for a person retiring today at age 65, what sort of income could they generate from $297,000? For a 65 year old, an account based income stream (pension) would provide a minimum income of $14,850 in the first year. Naturally, a higher level of income could be drawn but this would result in the retirement nest-egg diminishing at a quicker rate. For many people, the current level of Superannuation Guarantee of 9% will not, on its own, provide sufficient capital to enable them to enjoy the lifestyle they would like to aspire to in retirement. A financial planner can help you develop strategies to ensure you are on track for your retirement. If you require any further information or assistance, please contact Peter Hourn, at CMA Financial Solutions. CMA Financial Solutions Professional Investment Services |