More Aussies retiring without enough savings to self-fund

More Aussies retiring without enough savings to self-fund

It’s no secret that people are living longer than their parents or grandparents, so our retirement income needs to last us a fair few more years.

While there is no longer a fixed retirement age in Australia, most people choose to leave work around the time they become eligible for the Age Pension – 65.5 years old (67 in July 2023).

Currently the basic Age Pension is set at a maximum of approximately:

  • $826.20 per fortnight for singles
  • $1,245.60 per fortnight combined for couples

According to the latest Roy Morgan research, the number of people intending to retire in the next 12 months “is estimated at 439,000, a 6 per cent increase on the 2018 level of 414,000 and 11 per cent above the 2017 figure of 395,000.”

However, the savings levels of many of these Aussies are “well below” the recommended level to be self-funded, meaning they will likely be reliant on the age pension.

The Association of Superannuation Funds of Australia (ASFA) estimates that “an individual would need $545K and a couple $640K for a ‘comfortable retirement’”.

Roy Morgan found that the average gross wealth (total assets excluding owner-occupied homes) of intending retirees is $299K, up only 2 per cent over the last two years, from 2017 when it was $293K.

Although the average debt level for this group is currently only $27K, it does reduce their average net wealth to $272K, which is considered to be inadequate for self-funded retirement.

Roy Morgan’s conclusion is that these intending retirees will be relying on government benefits for some time.

How you can self-fund your retirement

There are a few ways you can stretch your retirement budget to make your income last longer or boost your nest egg now.

  1. Make a long-term budget

It may be morbid to think about, but the average life expectancy for Australian men is 80.9 years, and 84.8 for women. If you’re a woman intending on retiring at, say, 65 years old, you’ll need to work out a budget for your nest egg that will last at least 20 years, hopefully more.

  1. Look for a super fund with low fees

Aussies pay a number of different super fees, including membership fees, administration fees, management fees, performance fees and many more. If you’re a fair few years away from retirement, find out if you’re paying too much by checking your superannuation statement, and compare this against other funds to see how yours stacks up. Recent RateCity research found that making the wrong choice with your super could cost you more than $100,000.


  1. Diversify your investments

If you’re in a financial position where you can invest, it’s worth considering diversifying your assets so that your money can grow over time. This could be through investing in shares, property etc.

By having a diversified investment portfolio, you can work towards growing your capital and keep on top of growing inflation levels. While $20,000 hidden under your mattress may have been a lot of money 30 years ago, it would barely last a year for the average Aussie today. Investing in one or more assets can help your money to keep pace with inflation.

  1. Work part time

Australian Securities and Investments Commission (ASIC)’s MoneySmart website recommends part time work as a good option to ease into semi-retirement before fully retiring, or to keep extra income coming in.

While you may feel this defeats the whole purpose of retirement, ASIC advises that there are some benefits: 

  • Conserve your super balance – as you will be earning an income, you won’t need to draw as much from your super and can continue to contribute to the balance.
  • Tax incentives – if you are aged 55 or over you may be able to take advantage of a transition to retirement strategy, which allows you to supplement your pay by drawing down from your super after you have reached preservation age. You pay no tax on your super income from age 60 and your employer will continue to top up your super.”

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Learn more about superannuation

How does superannuation work?

Superannuation is paid by employers to employees, at least once every three months. The ‘superannuation guarantee’ is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary. The guarantee is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Superannuation is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working


How does superannuation affect the age pension?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

How do you claim superannuation?

There are three different ways you can claim your superannuation:

  • Lump sum
  • Account-based pension
  • Part lump sum and part account-based pension

Two rules apply if you choose to receive an account-based pension, or income stream:

  • You must receive payments at least once per year
  • You must withdraw a minimum amount per year
    • Age 55-64 = 4%
    • Age 65-74 = 5%
    • Age 75-79 = 6%
    • Age 80-84 = 7%
    • Age 85-89 = 9%
    • Age 90-94 = 11%
    • Age 95+ = 14%

If you want to work out how long your account-based pension might last, click here to access ASIC’s account-based pension calculator.

Can I choose a superannuation fund or does my employer choose one for me?

Most people can choose their own superannuation fund. However, you might not have this option if you are a member of certain defined benefit funds or covered by certain industrial agreements. If you don’t choose a superannuation fund, your employer will choose one for you.

Is superannuation paid on unused annual leave?

If your employment is terminated, superannuation will not be paid on unused annual leave.

Can I buy a house with my superannuation?

First home buyers are the only people who can use their superannuation to buy a property. The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So if you pay $15,000 per year into the First Home Super Saver Scheme, you have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

How much extra superannuation can I add to my fund?

There is an annual limit of $25,000 for concessional contributions – that is, money paid by your employer and extra money you pay into your account through salary sacrificing. There is also a limit on non-concessional contributions. Australians aged between 65 and 74 have a limit of $100,000 per year. Australians aged under 65 have a limit of $300,000 every three years.

What are government co-contributions?

A government co-contribution is a bonus payment from the federal government into your superannuation account – but it comes with conditions. First, the government will only make a co-contribution if you make a personal contribution. Second, the government will only contribute a maximum of $500. Third, the government will only make co-contributions for people on low and medium incomes. The Australian Taxation Office will calculation whether you’re entitled to a government co-contribution when you lodge your tax return. The size of any co-contribution depends on the size of your personal contribution and income.

How can I increase my superannuation?

You can increase your superannuation through a ‘salary sacrifice’. This is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Like regular superannuation contributions, salary sacrifices are taxed at 15 per cent when they are paid into the fund.

How do you find superannuation?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

How do you pay superannuation?

Superannuation is paid by employers to employees. Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Currently, the superannuation rate is currently 9.5 per cent of an employee’s ordinary time earnings. This is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

Am I entitled to superannuation if I'm not an Australian citizen?

Yes, permanent and temporary residents are entitled to superannuation.

What will the superannuation fund do with my money?

Your money will be invested in an investment option of your choosing.