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How much money do you need to retire? We're aiming to find out

Current accepted retirement targets are unrealistic for many. Our research will help develop new targets.

Last updated: 28 July 2021


Checked for accuracy by our qualified fact-checkers and verifiers. Find out more about fact-checking at CHOICE.

Need to know

  • Super Consumers Australia is working with research firm Fiftyfive5 to find out how Australians plan for retirement
  • This research will help develop a new set of retirement targets to guide how much you'll need to save for retirement

There's been a lot of talk recently about how super funds are doing in building up your retirement income as you work. But what about how they're helping you make the most of your income once you've finished working?

One of the key findings from the government's recent Retirement Income Review was that there's been "insufficient attention on assisting people to optimise their retirement income through the efficient use of their savings".

Many people are concerned about running out of money or not having enough to cover future health or aged care expenses.

Many people are concerned about running out of money or not having enough to cover future health or aged care expenses

In 2022, the government will launch a consultation on a Retirement Income Covenant. This will basically require all super funds to have a strategy for how they are going to help members make the most of their incomes in retirement. 

It should see funds develop retirement income products which will enable people to spend their savings with more confidence. It will also see more effort on guiding people to these products.

What type of retirement planner are you?

To help, Super Consumers Australia at CHOICE is working with research firm Fiftyfive5 to survey Australians on how they plan for their retirement. This research will be used to develop a set of retirement income targets which will give people a better idea of how much they'll need to save to meet their retirement needs.

The nationally representative research has already revealed three distinct groups of retirement planners:

  • engaged delegators (25%)
  • engaged DIY (37%)
  • disengaged (38%).

Engaged delegators are typically people on higher incomes. They are interested in their finances, but want experts to guide them. This group were more likely to seek financial advice, but equally were happy to be guided by default options. 

The engaged DIY group is spread across different income levels. They're also interested in their finances and feel confident enough to make decisions themselves, but need quality independent guidance and information so they can make the right decisions. 

Those in the disengaged group are typically on lower incomes. They aren't very interested in their finances, perhaps because they've got relatively little to manage. This group tends not to make decisions, instead opting for default options.

No 'one size fits all' solution for retirement planning

Through the research, it became clear that the three groups have different retirement planning needs.

"The solution for engaged delegators is a mixture of high quality financial advice and a system that supports them through clear defaults and nudges to make good decisions," says Super Consumers Australia director Xavier O'Halloran.

"Engaged consumers who want to take a DIY approach were typically less likely to trust others, like financial advisers, with their money. They are going to need high quality independent guidance and information. Something like a better resourced independent guidance tool, like ASIC's MoneySmart website would be a great start," says O'Halloran.

"Finally, for those with low levels of engagement, we need to understand that they often have few resources to invest. Instead, this group needs the system to deliver high quality defaults to help them make the most of their money. A seamless interaction between the Age Pension and their super savings is key," says O'Halloran.

Even those who report high levels of engagement might not spend much time on organising their finances in retirement

There's already a safety net in place for when people are contributing super during their working life – the default MySuper system. 

For people who aren't inclined to choose a super fund, this aims to connect them with a relatively well-performing and low-fee product.

But there's nothing like this for retirees. And even those who report high levels of engagement might not spend much time on organising their finances in retirement.

The majority of disengaged people had spent no time at all on retirement planning. More surprisingly, 35% of those in the 'engaged DIY' group also hadn't devoted any time to planning.

Further, 25% of the engaged DIY group and 39% of the engaged delegators reported that they tend to remain in the default options for managing their super. This finding confirms that good default retirement income products will also be critical for many engaged people.

'Self-interested voices in this debate' 

The survey showed that only a minority of people (41%) were positive about their financial position in retirement. This suggests a pressing need to find ways to give people the tools to more confidently engage.

"At the moment we're seeing people switch off due to fear when confronted by unrealistic, and frankly unnecessary retirement savings targets," says O'Halloran.

"There are some self-interested voices in this debate quoting the need for a million dollars in savings. It makes an attractive headline, but this isn't what the majority of Australians who are just looking to maintain their standard of living in retirement need to hear."

We're seeing people switch off due to fear when confronted by unrealistic, and frankly unnecessary retirement savings targets

Xavier O'Halloran, Super Consumers Australia

Similarly, there was a widespread feeling that retirement planning will be challenging; nearly half of those surveyed felt that the task would be 'moderately' to 'extremely' complicated. A previous CHOICE survey also found that retirement planning was too complex.

The aspects of retirement planning that most people were interested in were the super rules and procedures (e.g. the interaction with the tax system and age pension). People were also interested to know how much they'd need to save for retirement.

Of the survey respondents who'd assessed how much money they needed for retirement, more than three quarters (76%) found it a useful exercise.

Retirement standard 'a marketing tool for the super industry'

Industry lobby group Australian Superannuation Funds Association (ASFA) has produced its own retirement targets. While relatively few survey respondents had directly used these targets, they're widely used in government resources, in material published by super funds and by the media. 

Peter Davidson, principal advisor for Australian Council of Social Services (ACOSS) says the ASFA target (known as the ASFA Retirement Standard) "has become a marketing tool for the super industry".

"That standard is a luxury level of retirement involving regular trips overseas, restaurant meals with good wines once a week, major upgrades to the home, that sort of thing.

"Only the top 20% or so of retirees currently enjoy that level of living standard – it's pitched at that luxurious level." 

Davidson says an inappropriate set of retirement targets can also lead to misguided policy-making, such as super tax concessions flowing to high-income earners. "If high income earners want to sustain the lifestyle they've become accustomed to, that's up to them, not the government.

We really question this argument that people need over half a million dollars in super to live a decent life in retirement

Peter Davidson, ACOSS

"We really question this argument that people need over half a million dollars in super to live a decent life in retirement. That's industry marketing, not the lived experience of the average person."

The Retirement Income Review also found the ASFA target has "several shortcomings" as a measure of adequacy. It noted the target was originally designed (and continues to reflect) a standard for the top 20% of income earners. It reflects a standard of living that is actually higher than most Australians experience during their working lives.

"The ASFA target isn't realistic and could give people a distorted view of how much they need to be saving for their retirement during their working life," says Super Consumers Australia policy manager Franco Morelli.

"The new targets Super Consumers Australia are developing will be a more practical guide, based on the lived experience of Australian retirees."

Next steps for our retirement targets project

The research process will continue with Super Consumers Australia consulting with more members of the public as well as actuaries, academics and experts to develop the most comprehensive and useful guide for people on how much they need for retirement.

The completed targets will be available in October 2021.

Morelli says the research will feed into a two-pronged process to help people get the most out of their retirement.

"We're working to cut through the complexity of retirement planning and provide better information about peoples' retirement needs.

"Then, we're helping to ensure there are good quality products to help people meet those needs," he says.

This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.

We care about accuracy. See something that's not quite right in this article? Let us know or read more about fact-checking at CHOICE.

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