If you’re dreaming of a comfortable retirement (and who isn’t?) then you’ll probably need a lot more in savings than you realise.
New research carried out by Griffith University on behalf of financial education service No More Practice Education suggests that a staggering 81.3% of Aussies are failing to save enough to retire comfortably.
And it’s no surprise when you discover that Gen X Aussies will have to get their retirement fund as high as $4 million if they want to enjoy their golden years.
The stats estimate that Australians born after 1984 will need to save $2.09 to $3.98 million in order to self-fund a comfortable retirement in 26 years’ time.
The study certainly highlights the importance of budgeting and saving from a young age – and you’ll appreciate that nest egg when you’re older. No More Practice Education Founder Vanessa Stoykov points out that the age pension today is only a third of the amount required to fund a “comfortable lifestyle”.
“Although these numbers highlight the ‘worst case’ situation, preparing for this low growth scenario is essential because it’s been occurring in countries like Japan for the past two decades, so there is nothing to say it won’t happen to us too,” Ms Stoykov said.
A leg up
Fortunately, many younger Aussies will get a helping hand in the form of inheritance. McCrindle Research estimates that over the next 20 years, $3.5 trillion will be passed on from Baby Boomers.
This equates to a handout of $110,000 for 75% of all Gen X and Y with surviving parents. The question is, will it be used wisely?
That $110,000 could be a deposit for a house or another big investment, or it could easily disappear on a dream holiday and a new car.
“The expected inheritance figure is a huge amount of money that Gen X and Y is predicted to receive, however the unfortunate truth is that Australians simply don’t know how to invest it,” said Ms Stoykov.
“Through decades of experience in the wealth creation space I’ve learnt that to truly grow long-term wealth, people need to ‘unlearn’ everything they think they know about money.
“I can wholeheartedly relate to why people get overwhelmed when it comes to thinking about their retirement funds. For most people retirement seems like forever, or not something they are going to be able to do.
“The good news is that reinvention is the new retirement, and it’s entirely possible for Generation X and Y to achieve their goals.”
So what now?
If these statistics have shocked you into taking action, you’re probably wondering where to start.
The first thing you need to do is to understand how your finances look at the moment and what you can do in the short term to reduce your debt and establish your savings.
Entering some simple details into Monefly will help you build up a picture of your assets, liabilities, and cashflow. This lets you develop better budgeting habits to improve your finances.
Then, working with your financial adviser, you can create an investment strategy to make sure any spare cash you have is being put to good use.
$4 million might seem like a tall order, but the sooner you start working on it, the more achievable it will be.
- Over 80% of Aussies won’t have enough saved to retire comfortably, new research has shown.
- Those born after 1984 will need $2-4 million in savings.
- Don’t expect to rely on a government pension.
- Any inheritance should be carefully invested.
- Consult a financial adviser to discuss your options and create an investment strategy.