(May 31): New research shows Australians believe they need more than A$1 million (US$718,450 or $920,000) to retire comfortably, a jump of A$183,000 in 12 months, as inflation and rising living costs fuel persistent concerns about running out of money once they leave the workforce.
The annual survey by Colonial First State — one of Australia’s largest pension and wealth managers — also found people aspire to retire at 62, but expect to work until they are 66.
“The cost of living continues to increase, inflation has spiked significantly and then there’s many other factors of family and supporting others that Australians are going through,” CFS executive director for Retirement and Growth Marissa Powe said in an interview. “People are getting more engaged with their super, they’re seeing their balances and they’re trying to figure out ‘how long will this last me?’”
While Australia’s A$4.5 trillion pension industry ranks among the top global retirement systems, the CFS survey adds to the growing pool of data showing Australians are deeply anxious about their finances after stopping work. With 2.5 million Australians expected to enter retirement over the next decade, the industry has been under pressure to provide more options for people when they begin drawing down their pension savings.
Australia was grappling with high inflation even before the Iran war. The closely-watched trimmed mean gauge of annual consumer-price growth, which shaves off volatile items, accelerated to 3.4% in April, above the Reserve Bank of Australia’s 2%-3% target band.
The CFS survey of almost 2,000 people also found women are more likely to experience retirement-related stress, with about 62% worrying they won’t have enough money to live comfortably at that stage, compared with 48% of men.
See also: Half of Australians near retirement fear running out of cash
“The contextual factors there are around the lower lifetime earnings, on average,” Powe said. “Women are statistically more likely to have those broken work patterns,” she said, a trend that’s reflected in their data.
Women on average retire with lower balances than men, due to the gender wage gap, time away from the workforce to raise children, and part-time and casual work to balance responsibilities.
The Australian system is funded by compulsory contributions that originally started at the equivalent of 3% of workers’ wages and has steadily risen to 12%, meaning people who are in the workforce for longer with higher salaries can retire with larger balances.
The median balance for a man in the 60-64 age bracket is about A$220,000, while women in the same cohort have a median balance of about A$163,000. Overall, balances are expected to rise as people contribute at the higher rate for longer.
According to estimates from the Association of Superannuation Funds of Australia, a single person needs A$630,000 to retire comfortably at age 67, while a couple needs A$730,000. ASFA data from October show a 30-year-old median wage earner with A$30,000 in an account today is on track to retire with A$610,000.
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