How much super should you have at your age?

Martin Fahy, the  CEO of ‎The Association of Superannuation Funds of Australia, talks with Ross Greenwood about what the superannuation balance should be at a particular age.

Introduction: How much super should you have at your age?

Ross Greenwood: Welcome back to Work. Life. Money right around Australia. Always great to have your company here over the weekends. Of course, remember you can always contact us via worklifemoney.com and then, you click on the feedback icon, send us a note. Let us know what you’re thinking about as well.

Tell you one thing that is always worth pondering and that is the average balance in a superannuation account. One of the things you never really do with friends or family, I guess, is compare your balance. He’s not quite lucky so well, actually I’ve got $400,000 and I’ve got $150,000, and I’ve got $80,000 or whatever my pay. You don’t do that. So if people of your own age bracket, you don’t quite get a comparison as to how you’re going. So I thought we’d try and give you a little guide as to how you should be going as compared with the average.

Now, bear in mind, this also has lots to do with how much you have put in, whether you’ve taken gaps from work, the return of your superannuation fund, and whether you’re putting the extra money in. But, it is actually trying to take the average because remember also one other aspect of this, average might not be good enough to give you what you’d call a prosperous or even a more than comfortable retirement as well.

Now, the organization who does a lot of work on this is, the Association of Superannuation Funds in Australia and it’s Chief Executive Martin Fahy’s on the line right now. Many thanks for your time, Martin.

Interview with Martin Fahy, the  CEO of ‎The Association of Superannuation Funds of Australia

Martin Fahy: Hi Ross. How are you?

Ross Greenwood: Very well. Thank you. So this is an interesting one, isn’t it because it’s a bit hard to know and compare as to how well you‘re going inside that superannuation fund because most people do not compare their funds with their friends or family.

Martin Fahy: That’s right and we’d all like to think we’d had more than we have. It’s a bit like we’d all like to think we’re above average in the terms of attractiveness but, it’s good to look behind the numbers by different age cohorts and by gender.

Ross Greenwood: But, when you’re as good looking as someone such as myself man, you always know that you’re above average in terms of looks. Now, it’s actually a serious matter because the problem is if you look at the overall averages of people who’ve got into this superannuation funds, most people would, from a common sense point of view say it doesn’t seem enough. So, you do this surveys from time-to-time to try and figure out what the averages are. What have you come up with?

Martin Fahy: What we have is and this probably sounds shocking to people but, the most recent data that we have from the ABS is actually for 2013 and 14. 15, 16 numbers aren’t out yet. But, if you take all the people of working age across Australia that is above 15 years of age, the average balance for men is about 98,000 and the average balance for women is 54,000. Now, that doesn’t seem like a lot and it’s a big gender gap but, that reflects the fact that people who are young, who’ve come in to the work force have very small balances and have only been contributing for a while. If we move up a little bit, what we know is that if we look at for instance people between 30 to 34 years of age, they only have $36,000 for men, $25,000 for women.

Ross Greenwood: Wow, and this actually also helps to explain one other aspect of superannuation. The younger people tend not to be as engaged in this superannuation as older people and the reason is because their account balances haven’t had the time in the market to obviously have the effect of compounding and so, it’s when a person gets out over a $100,000 or more or $80,000 or more, that they have a sense that they’ve actually got some real assets in there.

Martin Fahy: That’s right and they may have it spread across a number of accounts, and they may be paying double fees so, they need to get on to the myGov website and consolidate all those funds and get engaged with it because it is an important source of your long term retirement funding.

Ross Greenwood: Okay. So then go a little bit further out and is that compounding effect and the time and the work force actually does take effect as people get towards that time of retirement, what balances do they have at that stage?

Martin Fahy: When we look at people in that 60 to 64 year age cohort, what we discover is that at the end of 2014, men had about $292,000 in their balances and women had about $138,000. Now, that gender gap has obviously grown and it’s a result of broken employment patterns for women and the gender wage gap and also the fact that we’re finding that the participation of women in the work force is lower.

Those numbers are quite out of date, so they’re 2013, 2014. What we do know is that this has been a bumper year. The financial year end has been a bumper year for superannuation funds. What we have is we’ve got some survey data called the HILDA survey and that’s the Household, Income and Labour Dynamics [crosstalk]

Ross Greenwood: Martin and to be honest, we have spoken with the boss of HILDA, the author of that report, Roger Wilkins just a short time ago on the program as well.

Martin Fahy: Now, what the HILDA did, it shows is that if you look at people who retired in the last four years, the balances they are actually quite, quite good. The median balance, that’s the person in the middle, so if there was 13 people, this is the seventh person, six people below, six people above. The median balance there for men was 325,000 but, the median balance for women was a 110 and that’s a big gap and so that’s become a real cause of concern. But, it’s also a long way short of what I would think is comfortable retirement. We think for a comfortable retirement, a couple need about $640,000 in their superannuation savings to be comfortable in retirement.

Ross Greenwood: Just a big question for you, Martin is with the changes by the government in regards to superannuation, if you are putting in say the maximum pre payment, you’re not really going to get to that level any time quickly so there’s a fundamental problem of catch up and you’re talking about a comfortable retirement but, for a lot of people, it’s going to be relatively difficult to get to that level of retirement funding during their working life and especially if they’re only putting in the minimum, the superannuation guarantee charge.

Martin Fahy: That’s right and to be of who assumes that you pay through your host and you don’t have a mortgage. If you needed to pay rent, you need even more money. So what we’re saying to people is, start early, put in as much as you can, if you can afford, put in additional concessionary contribution, then get them in and try and maximize the amount that you put in when you’re in employment and you need to watch for those broken employment pattern.

The good thing is those that, what we know as the balances will grow. We’ve had a really good return in investment and compounding. So if you’re on $70,000 a year and you had a balance in your super of a $ 100,000 two years ago, so, you’ve been putting in super for quite a while and you’ve got a $100,000 in your super two years ago. What we know is that this year, you’ll have $142,000 in the balance made up of $17,000 in extra contributions over those two years but $25,000 due to compounding investment earning. So, you can take your balance up. If you’re on that $70,000 wage and you’ve had $100,000 of a balance in the last three years through contributions and return, you would’ve got an extra 42, so that’s setting you on the road to a better return.

Ross Greenwood: And it gives people some idea to just how much others have in their superannuation funds so they can get a sense of comparison. Women, of course, still have fundamental problems and that’s largely as a result of the gaps in the work place but also the fact that they continue to be paid less than men. The Chief Executive of the Association of Superannuation Funds in Australia, ASFA is Dr Martin Fahy. Martin, we appreciate your time here on the program.

Martin Fahy: My pleasure.

Listen and Read to other interviews by Ross Greenwood on Superannuation.

26-09-2017 Interview of  Dian Tjondronegoro, Southern Cross University titled ” What is Activity Based Work Environments ”.

15-09-2017 Interview of  Dante De Gori, CEO Financial Planning Association of Australia (FPA) titled ” Are you happy with your lot in life? ”.

14-09-2017 Interview of  Stephen Anthony, Chief Economist, Industry Super titled ” Why our retirement savings may be at risk ”.

13-09-2017 Interview of  Justin and Bec, Trip in a Van titled ” A better way to spend your retirement ”.

08-09-2017 Interview of  Michaelia Cash, Minister for Employment titled ” How to get back to the workforce ”.

06-09-2017 Interview of  Dr. Martin Fahy, CEO, Australian Superannuation Funds Association (ASFA) titled ” What is Superannuation Guarantee (SG)? ”.

05-09-2017 Interview of  Brenda Perrick, Volunteer, Meals on Wheels titled ” A new way to spend your retirement ”.

31-08-2017 Interview of  Louise Davidson, CEO, Australian Council of Superannuation Investors titled ” Bringing in the big bucks ”.

30-08-2017 Interview of  Kristy Hatcher, Litigator, Owen Hodge Lawyers titled ” Warning: Nominate your beneficiary! ”.

29-08-2017 Interview of  Kelly O’Dwyer, Minister for Revenue and Financial Services titled ” Crackdown on super non-payments ”.

29-08-2017 Interview of  Meagan Lawson, CEO, Council of the Ageing titled ” Time and Money…can you have both? ”.

24-08-2017 Interview of  Wade Tink, ex Army Officer titled ” Ex-Army officer making a difference in the developed world ”.

15-08-2017 Interview of  Framy Browne, Head of Lavan Lawyers titled ” Can De-Facto couples share their super if they split? ”.

14-08-2017 Interview of  Michael Rice, CEO Rice Warner titled ” How important is insurance to your superannuation? ”.

07-08-2017 Interview of  Sam Macedone, Macedone Lawyers titled ” Divorce and superannuation: Who gets what? ”.

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