Photo by Greg Newington.
A LAUNCESTON couple visited financial adviser Tony Gray five years after the global financial crisis started.
"They had retired shortly before the GFC and had elected to take a relatively high pension - about 10 per cent or 12 per cent of their super balance as I recall," Mr Gray said.
"They were invested in growth assets and did not adjust down their pension at all.
"The result was that one year into the GFC, their effective pension drawdown had become something in the order of 14 per cent to 17 per cent per annum.
"This drained their assets rapidly and meant that five years into retirement they had run through 80 per cent of the funds that should have been adequate to provide a comfortable retirement for decades."
Superannuation trust REST found in a survey of 1200 working Australians over 50 years of age that just 14 per cent of baby boomers felt financially prepared for retirement.
More than one-third of survey respondents were completely unprepared and 51 per cent somewhat financially prepared.
Compulsory superannuation guarantee contributions were introduced by the federal government in 1992.
Mr Gray said employer superannuation guarantee contributions were unlikely to be sufficient for a comfortable retirement without non- superannuation investments.
He said the adequacy would improve as the employer payment gradually rose from 9 per cent to 12 per cent by 2019-20. "Women are especially at risk if relying only on employer super, as they are more likely to work part-time or have broken careers due to children," Mr Gray said.
He said Australia's tax system rewarded voluntary superannuation payments.
"An average wage earner can generate a 19 per cent per annum tax saving by arranging a salary sacrifice arrangement with their employer," Mr Gray said. "The money is locked away until retirement, but it is in a low-tax environment."
The Association of Superannuation Funds of Australia estimates that a couple wishing for a comfortable retirement lifestyle need $56,236 a year, with $32,511 a year needed for a modest retirement.
Mr Gray said that although life expectancy for men was 17 years after retirement age, with 20 years for women, retirees should plan for funds to last longer.