The average Australian believes they need $1.6 million saved for a comfortable retirement, according to research from CFS.
Findings from ‘The CFS Rethinking Retirement Report 2024’ show the number jumps to $2 million for those who have never received financial advice.
“It’s a very strange figure, I was equally surprised when I saw it,” CFS Superannuation chief executive Kelly Power tells Professional Planner.
Power hypothesised that it was likely tied to the transfer balance cap, the limit on the amount of superannuation that can be transferred to the retirement phase. “I can’t see any other reason, it’s such an arbitrary number,” she says.
Power notes that compared to the ASFA retirement standard, which recommends a super balance of $690,000 for a comfortable retirement for couples and $595,000 for singles, the CFS survey findings reveal a general lack of understanding of how much is needed.
“[$1.6 million] is an extraordinary sum and it reflects that non-advised members and individuals just don’t have a good grasp on what actually is needed to retire and how to navigate the retirement system,” Power says.
Additionally, many retirees have a “strong desire” to pass on retirement savings to loved ones, potentially putting them at odds with the “purpose of superannuation” definition proposed by the Albanese government, which suggests the focus should be on using super solely to create a dignified retirement. The survey found half of respondents wanted to pass on at least 25 per cent of their savings.
“There’s definitely a tension there,” Power says.
“Holding onto some portion of assets in retirement is quite a typical thing that we hear from our members.
Power adds the findings reflect a genuine concern about the cost of living, longevity risk and wanting to the support the intergenerational wealth transfer.
“At the end of the day it is members money and they’re entitled to do what they want,” Power says.
“There is a policy tension, given the tax concessions. You want to see people drawdown on that faster.”
The research found most Australians have concerns about retirement and are afraid or embarrassed to ask for help.
Respondents were also asked about what question they were most afraid or embarrassed to ask with the most common response being “how much money do I need to retire?”.
The research, based on a national survey of 2247 Australians including 430 retirees, found that 83 per cent of Australians want the flexibility to access their super in retirement if they need it, instead wanting to work beyond retirement age.
The report found that seven in 10 retirees say they are currently able to enjoy a comfortable retirement with the amount of money they have saved, but when asked what a “comfortable retirement” looked like to them, responses varied.
The most preferences for working beyond retirement age were reduced hours in the same role (18 per cent), continue working the same hours (15 per cent), pursuing a passion project with less hours and less pay (14 per cent), dipping in and out of work (10 per cent) or switching to a less demanding role (10 per cent).
The research found advised Australians are also more likely than unadvised Australians to be enjoying their retirement, with 77 per cent of advised retirees stating they enjoyed retirement compared to only 52 per cent who never received advice.
Additionally, advised Australians are twice as likely as unadvised Australians to retire at a time of their choosing.
However, the survey found only 37 per cent would go to their super fund for information about retirement planning, with just one-in-three pre-retirees (aged 50-64) interested in hearing from their fund in general.
Power says the research reinforces that no two member needs for advice and retirement are the same, and funds need to offer more bespoke guidance.
“Things like defaults and basic nudges are not going to solve this problem,” Power says.
“What it means for us is having hybrid [digital/personal advice] conversations or personal advice conversations to navigate people through the complexity of retirement.”
