Superannuation Myths: Will Super Come Up Short?
Superannuation can often be misunderstood. However, as more and more of us turn our attention to saving for retirement, it’s important we are educated on the status of our own super savings. Australians also need to understand how they can utilise their account to make sure they have enough saved before they retire.
In this post, we will break down some of the myths about superannuation, and as identified by ASFA we’ll highlight and summarise the truths that can help you for your own future:
Myth #1: Superannuation is not working well enough to get people off of the Age Pension.
Busted: Fewer people are actually claiming the Aged Pension benefit as time goes on, which essentially indicates that there is less need for this as more people have higher superannuation balances and work past the age of 65.
Since 1997 the number of Australians over age 65 on the plan fell from 79% to 70% and is expected to drop low as 60% or less in the coming 40 years. Eventually, people on part Aged Pension plans will outweigh those on full plans as well.
Myth #2: My Superannuation will not help improve my quality of life during retirement.
Busted: Many people find that their superannuation accounts allow them to live more comfortable lives than they would if they didn’t have access to those extra funds in retirement. About 22% of people aged 65 and older say that the money from their superannuation is their main source of income, and people aged 65 to 69 relying mainly on their super for income has increased by around 35% in the past two years. Less people are relying on the Age Pension, and average super balances are increasing, providing retirees with a more comfortable lifestyle.
Myth #3: Most senior-aged Australians don’t have most of their assets in superannuation accounts.
Busted: Actually, over 90% of Australians cite a combination of their superannuation and their owner-occupied property as the majority of their savings and net worth. Even if you exclude owner-occupied housing, home contents, and cars, super makes up the bulk of household wealth.
The Australian Bureau of Statistics (ABS) has further confirmed that super is the major financial asset for most households – even before their retirement.
Myth #4: Savings outside of my super grow more rapidly than savings put into a superannuation fund.
Busted: Over a 10-year period, superannuation accounts have actually turned out to provide higher returns versus funds held outside of super accounts.
As identified on page 13 of APRA’s ‘Mythbusters – Myths that super will come up short’ report:
- The tax treatment of super leads to more savings being invested and higher returns as well.
- Also, individuals in APRA regulated funds like Nationwide Super benefit from well-diversified investment portfolios that otherwise wouldn’t be as accessible.
- In addition, as contributions into super accounts are compulsory for employers, it’s less likely this amount of money would’ve been saved by individuals themselves outside of this program.
Now that we have set some myths straight and debunked them with facts, you are more well-informed about how superannuation really does benefit you.
For more information about superannuation and saving for a financially stable retirement, please feel free to contact us.