Super’s role in gaining your independence

Many Australians put their future independence at risk because they don’t know the important role super plays, writes Gayle Bryant.

  • Australians want independence and see money as important to that
  • But many don’t understand superannuation’s power to achieve that
  • Some of us are dangerously underestimating how much we need
  • But there are standards to aim for and steps to take control

Research, commissioned by ANZ, makes it clear that independence is a priority for the vast majority of Australians (71 per cent) – both now and in the future. ANZ’s survey showed Australians feel independent in their life, and believe money plays an important role in gaining and maintaining that sense of independence – but most were confused over how superannuation fits into this.

Over a quarter of Australians don’t know how much super they have, and many are wildly wrong about how much they need to have a satisfying, independent life post-work.

What the research found

ANZ’s in-depth survey of 1000 Australians in March this year found ‘independence’ is a priority for most Australians. The majority (73 per cent) of Australians say they feel independent – a state they define as being “secure, safe, happy and responsible for their own lives” – because they can look after themselves financially.

Women are significantly more likely to feel that independence means “not having to rely on others”, while men feel “being in control” best describes it.

And what role does money play in people’s independence?

  • One-third say independence is “financial freedom”.
  • About 20 per cent say it is not having any debt.
  • For 30 per cent of Australians, independence is “having enough money to live my life”.
  • About 40 per cent say superannuation is a key asset in their plans to live a fully independent life.

Super-charged independence

Almost all Australians are thinking about the money they’ll need in retirement.

Superannuation is a key strategy to save long-term (for 20 per cent, it is their only strategy), but many Australians also plan to continue working and develop other savings to give them the independence they are looking for in life.

Even though super has this important role, when it really comes to getting a grip on super, things start to go fuzzy for Australians.

What we get wrong

  • A quarter have more than one super account, meaning fees are eating more of our savings than they should.
  • One in 8 people don’t know what super is for, or believe it has no purpose. In fact it’s specific purpose is to give us future independence.
  • Fifteen per cent don’t know their super balance. This indicates we’re not managing it to help bring about the independence we say we want.
  • Most (72 per cent) are concerned about whether they’ll have adequate funds for retirement (a bigger concern for women than men), suggesting they don’t have a plan in place.
  • About 38 per cent believe a super balance of less than $300,000 will be enough to retire on, which is an unrealistically low estimate.
  • And 31 per cent of 18-to-34 year olds believe they’ll need less than $100,000. Meaning their expectations is not ground in reality, as $100,000 would last about only a couple of years.

Katrina Horrobin, from The Association of Superannuation Funds of Australia, says financial independence is very important for all Australians in retirement but not everyone achieves it.

“The age pension is sufficient to avoid absolute poverty in retirement but just avoiding poverty is not a goal that Australians aspire to,” she says. “Superannuation is the key to financial independence and to a life of greater dignity and comfort in retirement.”

How much do you need for a comfortable life?

So why do people expect to rely on super for their financial freedom, and yet are largely disengaged from it, not understanding it fully and not taking care of it?

Horrobin says many people simply aren’t aware of how much money they need to retire.

To help educate people, the association developed retirement standards for a modest and comfortable lifestyle (presuming you own your own home and you’re a healthy 65-year-old).

  • The modest retirement standard is $24,250 a year for a single. A budget for fairly basic activities, and a slight improvement to life on the age pension.
  • comfortable retirement annual income would be $43,665. Which means you can be involved in a broad range of activities and to have a good standard of living.
  • Renters will need more than $1 million in savings. But maybe not just for them: other organisations advocate $1 million as the ideal figure for everyone entering retirement.

Small steps to getting a bit more control of super

1. Know your balance

Get online or call your fund – as a first step know how much super you have.

2. If you have more than one super account

Consider rolling it all into one so fees don’t eat away your savings.

3. Work out what a comfortable retirement means to you

Speak to a financial planner or work out yourself how much super you need to have a comfortable, independent life.  (These calculators can get you started.)

By giving your superannuation some attention, you have the opportunity to make sure it successfully meets the goals you have. Really, it’s one of the easiest ways to achieve financial freedom and independence in retirement.  Now’s the time to take charge.