Happy Easter! Have you eaten all of your Super Nest Eggs?

Coronavirus has transformed our lives with many of us considering our household budgets as a consequence of social isolation.

Since our last newsletter, there have been a number of additional economic stimulus measures introduced by Federal and State Governments.

One measure is that eligible individuals can get early access of up to $20,000 from Superannuation over the next 2 years. This is to support people facing financial hardship (i.e. unemployed, receiving social security payments such as Jobseeker, or sole traders).

Let’s take a deep dive into people’s retirement nest eggs based on a recent Report we prepared.

►   Advisory Street recently provided a strategic economic assessment to the Government on the future of Superannuation Guarantee, with specialist expertise by Dr Vince FitzGerald AO (the seminal author of superannuation in 1993).

►    The advice was commissioned by the Financial Services Council (FSC) who represent MLC, BT, AMP, Colonial First State and others.

Median superannuation balances by age (2017-18 dollars)

Source: Australian Bureau of Statistics

From the chart above, we can see that:

* Median superannuation balances were $52,000 in 2017-18.

* Women currently retire with around 70% of the superannuation balances compared to men, as women have more interrupted work patterns (e.g. unpaid leave around childbirth, caring for elderly parent) and lower wages compared to men in similar occupations.

* The difference between men and women was widest among women aged 45-54 years. 

So should you be withdrawing your Superannuation during these difficult times? 

You may wish to consider the following:

►    The withdrawal may come at a time when equity markets and asset prices are low, so members may be capitalising on a loss rather than waiting for a rebound in equity markets;

►    You may also forfeit insurances, such as life insurance;

►    Without additional Superannuation contributions down the track, it may not be sufficient to make up what are already lower retirement incomes.

Our analysis showed that there is already a Retirement Savings Gap — a gap between Australian’s current saving levels and the amount required to live comfortably in retirement.

You may require additional Superannuation contributions above the 9.5 per cent legislated, even if you receive the Aged Pension (see chart below).

Required Superannuation contribution rates by cohort (including the Age Pension)

Source: Rice Warner

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What does this all mean?

While superannuation is primarily for retirement, these are unusual times with unique circumstances.

You may require these funds to support their current livelihoods, irrespective of short-term volatility and other downside risks.

#superannuation #economics #retirement #savings #retirementincome

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Please note that this newsletter contains general information only. It should not be relied on as financial advice. If you need individual advice, please contact your accountant or financial planner.