A comprehensive guide to boosting your retirement savings

The world of finance can often seem intimidating, especially when delving into subjects like superannuation. As a crucial aspect of every working Australian's financial plan, understanding the fundamentals of superannuation is not just prudent; it's essential. Whether you are at the commencement of your career, in the prime of it, or nearing its end, being knowledgeable about your future financial security should be a priority. This blog post aims to break down the complexities of superannuation, guiding you through its intricacies and helping you make informed decisions about your financial future.

A look at the state of superannuation in Australia

We all talk about superannuation – we’re bombarded with ads for it everywhere, pollies like to spruik how they’re boosting rates for workers, and employers try to attract top talent with generous super contributions. But with all that in mind, what does the landscape of Australian superannuation look like in 2023?

Many factors can influence your superannuation balance as the years go by. Market ups and downs, investing in certain funds for different life stages, whether fees contribute to life or income insurance policies, and making voluntary contributions. Of course, as we all have different jobs and goals, this too can make superannuation varied among Australians.

So, what are the average superannuation balances, the current rates, and how much super should one have if one plans to retire in the near future?

Average superannuation balances in Australia

• A representative survey of 1,002 Australian adults showed that 16% of Australians currently have a super balance of less than $10,000, the highest number in the poll.
• 12% have either between 100,001-$200,000 and $200,001-$300,000 and the same proportion have no super at all.
• The highest cohort of Australians with $10,000 or less in super were the 18–24-year-old bracket who may be starting off their working lives and/or are yet to consolidate any super from casual jobs.
• 25% of 18-24s have between $10,001-$25,000 in super.
• 22% of 35-44s and 45-54s have between $100,001-$200,000 in their funds, with 21% of 55-64s holding $200,001-$400,001. The demographic with the highest percentage having no super at all are the over 65s at a whopping 31%.

The Gender Gap – men vs women’s super

• The survey showed that men are twice as likely to have a higher superannuation balance than women.
• 16% of men have between $200,001 and $400,000, compared with almost half that number for women (9%).
• Though self-reported, 7% of Australian men said they hold a balance of between $400,001 and $700,000 compared to 4% of women. Men are also more likely to have higher balances: $700,001 to $1 million (4% to 1%) and $1 million and over (3% to 1%).
• 13% of women have no super balance, compared with 11% of men.

How much super should I have?

• As of 2023, the minimum superannuation guarantee legislated by the Federal Government is for employers to pay 11% of ordinary time earnings (OTE) into super at least four times per year. This will increase to 12% on 1st July 2025.
• In 2021, the Australian Super Fund Association (ASFA) said for a single or couple to live on a modest amount is about $70,000 as a single. However, if one were to live comfortably, this jumps up to $640,000 in super.
• As for confidence in their super, 40% of those surveyed said they are not confident that they will have a high enough super balance when they reach retirement age (65 years old.)
• 38% of men felt confident or very confident they will have enough in retirement, while only 25% of women could say the same. 44% of women said they were unconfident or not confident at all.
• 39% of 25 to 34-year-olds and 41% of 35 to 44-year-olds lacked confidence in having the super balance they need by retirement. Only 26% of 35-44-year-olds were confident or very confident, while only 28% of 45-54-year-olds agreed with the statement.
• Those aged 18 to 24 are the most confident in saving enough money by age 65. Those aged 18 to 24 are the most confident in having enough money saved by the age of 65. 43% felt confident or very sure that they would have enough money at that point in their life, whereas just 24% felt unconfident or not confident at all.
• When the figures were broken down by gender, 38% of males felt confident or very confident that they'd have enough saved, compared to 25% of women. While 35% of males were either unconfident or did not feel confident at all, this figure jumped to 44% for women.

Does switching super funds or self-managing help?

This comes down to the type of fund, how the fund is structured, and how the fund invests the capital raised. This can all fluctuate over time due to interest rate rises or falls, market performance, property market performance, fee structures, and costs to run and maintain.

SMSFs may be preferred by sophisticated investors who have a deeper knowledge of the stock market. Retail (ones run by banks and financial institutions) or industry funds may have lower fees but lower risk profiles, which usually means steady yet lower returns than high-risk investments, which may or may not pay off. You should consult a financial adviser for information on any major financial decision. You should consult a financial adviser for more information with any major financial decision.

How to increase your super balance

• Making voluntary superannuation contributions contributions to superannuation can boost your final super balance and also serves as a tax deduction (more on how that works here.)
• Over half (55%) of Australians don’t make any additional contributions into their super account – 55% of men and 60% of women.
• Only 1% of Australians (men and women) make more than 20% voluntary contributions to their super account.
• 67% of 25-34s make no additional contributions with 64% of 18-24s doing the same.
• Men usually make higher contributions than women (17% vs 14% making between 1-5% contributions.)
• Making higher contributions can be difficult, especially when cost of living and inflation puts pressure on household spending on essentials.
• Of course, one way of increasing your super balance is to sign up to Grow My Money, which can grow your super with your everyday spend, giving you cashback into your super account!

Small amounts invested in your super can really add up over time, giving you a significant boost to your retirement savings.

Learn more or download the app.

This blog contains general advice only and does not take account of an individual’s objectives, financial situation or needs. Before acting on this general advice, individuals need to consider its appropriateness having regard to their objectives, financial situation or needs and should seek their own independent advice.

Author: Adrian Edlington, from Savvy.com.au