The average Australian may need to save between $75,000 and $100,000 a year just to comfortably retire, according to new financial research.
And while superannuation is the main asset on the road to retirement, the fund you invest in may not give you the full picture of where your money is going.
A new analysis by Market Forces shows that several super funds are potentially misleading consumers through green laundering.
Both editions shed light on the major challenges the average Australian will face in the future as inflation and the cost of living continue to rise.
The survey, conducted by financial planner Merit Planning, collected hundreds of responses from retirees about their experiences and showed how big their savings should be in the coming golden years.
42 percent of respondents said they needed between $75 and $100,000, and about 20 percent said the average person needed more than $100,000 a year.
Only 6% of respondents said that an old-age pension of about $40,000 a year is enough to retire.
33% said the Australian Pension Fund Association’s (ASFA) comfortable pension standard of around $65,000 a year was enough.
Financial planner Darren Howard said the average couple in Sydney needs to earn around $85,000 a year to live comfortably in retirement.
“Coming of age pension provides approximately $25,000 for a single retiree and $37,500 for a couple, so they will receive this income if they retire without money,” Mr. Howard said.
“To extrapolate that, just to get the income you get from your adult pension, you would need a lump sum return of 3% interest of approximately $835,000 or 5 percent of approximately $500,000.
“For couples it would be $1.25 million at 3 percent and at 5 percent it would be $750,000.
Mr. Howard said many retirees are still retiring to invest in assets that will provide enough income to meet their living needs while leaving other assets untouched.
Some end up dipping into their capital to fill the gap in their capital base, he said.
“There is a vicious cycle going on where they now have a lower capital base to generate income coupled with even lower interest rates in recent years,” Mr. Howard said.
“Retirees need to understand that they need to strive for the full return on their investment in retirement.”
Craig McDonald, owner of CBM Mortgages, said: “We talk to all of our clients about their retirement and their retirement situation and what it will look like when they retire.
“We encourage them to speak with a financial planner to ensure they take these steps early.”
In a separate analysis by campaign group Market Forces, many of the “sustainable” superfunds tasked with managing pensions fell short of what they claimed.
This comes after a recent warning from the Australian Securities and Investments Commission (ASIC) that offering or promoting financial products related to sustainability that do not comply with labeling or use “vague terminology” may violate consumer protection laws regarding introductory misleading and deceptive behavior.
“The very existence of a ‘sustainable’ investment option implies that the default superfund option is somewhat ‘unsustainable’, which is a major problem,” said Brett Morgan, Market Forces campaigner.
“Finding out that your retirement savings are being invested in companies opening new coal, oil and gas mines will be a big blow to members of ‘sustainable’ superfund options.”
The company analysis looked at superfunds that invested in fossil fuel companies that have been a major contributor to climate change, dubbed the Climate Pest Index.
UniSuper Balanced had the highest investment exposure on the index on the list due to its large stake in mining giant BHP.
CareSuper, TWU, and Qantas Super also made the top four with an impact rating of 8.14%, 7.65%, and 7.63%, respectively.
Originally published as The exact amount that the average Australian will need to save for retirement has become known.