It’s well known that it costs money to raise children but it’s not just the expected costs of feeding, educating and dressing kids that’s denting parents’ wallets – Australians’ retirement savings accounts could be taking a hit, too.
Raising children affects retirement plans
Career breaks to raise children are the biggest barrier to having adequate retirement savings, according to MLC’s Quarterly Wealth Sentiment Survey for the June quarter.
The figures certainly jumped out — this specific retirement savings barrier bounced upwards by a huge 70 percent to take out its number one place.
Of the 2,000 individuals surveyed, 38 percent expect to face a financial shortfall when entering retirement. That’s more than one in three Australians that will be left with savings accounts with balances that won’t support retirement, which is a staggering proportion of the population.
The results are not equal
Perhaps unsurprisingly, a higher proportion of women than men ranked a career break as their single greatest barrier to impacting their retirement savings account figures.
A career break was the most significant barrier to having sufficient retirement saving for women, while men rated this as the third-most significant barrier.
However, it’s essential for all parents to consider their super plans or SMSFs.
“Families, and particularly women, concerned about the impact career breaks will have on their retirement savings should plan ahead as there are strategies that can minimise this financial shortfall,” said Lara Bourguignon, National Australia Bank Wealth General Manager of Client Management.
It appears that saving sooner, rather than later, could be the key to the puzzle that is retirement planning.
That said, some Australians have not taken this approach. According to the MLC survey, around one-quarter of women more than five years from retiring are not investing at all. Yet surprising, women tend to worry about investments and superannuation more than men do.
How far do Australians need to go?
Between June 2012 and July 2013, there were 4.7 million people in the workforce aged 45 years or older, according the Australian Bureau of Statistics.
Of these people, 79 percent (3.7 million) said they plan to retire from the labour force in the future. On average, men intend to retire at 63.8 years, while women intend to do so at 63 years.
Almost half (49 percent) of those over 45 years who said they intend to retire in the future expect their SMSF or superannuation fund to be their main source of income. This suggests that a significant proportion of Australians look elsewhere to fund their retirement.
With the cost of raising children, making home loan repayments, paying bills and squeezing in the odd holiday stacking up, planning for retirement sooner rather than later is the way to go.