Aussie workers are likely more on track for a dignified retirement than they think, but it comes with a major caveat.
Super Consumer Australia says surveys of retirees show most people will spend less than what experts say they need at the end of their working life.
The SCA says a typical single retiree will need $322,000 in superannuation when they retire to support spending of $44,000 per year in their post-work years, while a couple will need a combined superannuation balance of $432,000 to support spending of $64,000 per year when they leave the workforce.
According to SCA, single retirees who want a higher standard of living in their retirement will need $891,000, allowing them to spend $61,000 a year, while a couple who wants to spend $89,000 a year needs to have a combined $1,216,000 in super.
Under each of these scenarios, the retiree has a 90 per cent chance they’ll be able to spend at these levels until age 90 before moving onto a full aged pension.
The scenarios also come with a second caveat of home ownership.
SCA deputy chief executive Katrina Ellis said these figures were based on what retirees actually spend and their current pension rate instead of a theoretical figure.
“We think it is important for people to benchmark themselves against what other retirees are actually spending,” she said.
“For homeowners, they are very likely to be happy with their financial situation in retirement, hence we think it is a reasonable proxy to use.”
Ms Ellis said about 90 per cent of homeowners were comfortable in retirement, based on survey data from her organisation.
“Yes, our numbers are a bit lower but they are based on actual spending, instead of telling people they need more superannuation and if they don’t have a very large super balance they are going to be suffering,” Ms Ellis.
“More people are on track than they think, but this is for homeowners.”
Overall, Ms Ellis believes Australian homeowners are doing better than they think, with those owning their own home often happy in retirement.
“Retirees who own their own home tend to be happy with the money they are spending and feel financially secure,” she said.
“When Australians are working they are time poor but earning a salary, but when they retire they are time rich and even if they are living on a steady income, that quality of life increases and retirees are happier than when they are working.”
Ms Ellis said the retirement system heavily favoured those who owned their own home outright.
“With the family home not being included in the assets test for the aged pension, (the retirement system) is really set up based on the assumption people own their own home,” she said.
“It also assumes people have paid off their home because then housing costs are pretty stable at that part of their lives.”
‘Real risk’ for renters
Australian renters are being warned they will need to accumulate nearly twice as much super as a retiree who owns their own home.
According to the SCA, a typical single retiree who rents would need $659,000 in super compared with $322,000 in super needed by a retiree who owns their home.
Meanwhile, a couple who rents needs $786,000 combined in super compared with $432,000 combined in super for a couple who own their home.
This would cover a modest retirement with the retiree in part relying on the aged pension.
This is again a spending rate that has a 90 per cent chance of lasting until the retiree reaches 90.
SCA chief executive Xavier O’Halloran said telling renters to simply save more was not a solution to the problem.
“The 2026 Retirement Savings Targets for Renters has found that renters are at a real risk of retirement disaster if the government doesn’t act,” he said.
Mr O’Halloran said retired renters continued to face higher rates of financial stress and poverty than homeowners.
He said long-term solutions involved getting more Australians into housing.
AMP director of retirement Ben Hillier agrees, pointing out it is critical for more houses to be built to help these Australians pre retirement.
“Homeownership is one of the biggest determinants of a financially confident and comfortable retirement – and if housing unaffordability continues, the unfortunate inevitability is that more Australians will be heading into retirement as lifelong renters,” he said.
“It’s another reason why initiatives to boost our nation’s housing supply are so important.”
But, Mr Hillier points out, as the superannuation system matures, balances are growing that could offset some of the pain for renters.
How to boost your super
AMP super director of growth and customer solutions Julie Slapp said Australians could make small changes if they felt they were falling behind on their superannuation balance.
“Small steps – like checking your fund details or talking to your provider – can build confidence and unlock the full benefits of compounding returns,” she said.
“We know that as little as an extra $20 a week put into super can grow to $98k over 30 years through compounding, yet more than half of Aussies under 40 don’t understand the concept.”
Originally published as ‘More on track than you think’: New figures show Aussies on track for comfortable retirement