From the SMH:
Today’s young workers can expect to have an average $1.1 million in superannuation when they retire but it won’t be enough to maintain a comfortable post-work lifestyle.
New research by Deloitte has found a 30-year-old worker on an average salary of $60,000 a year will have an estimated $1.1 million in super by the time they turn 65 in 2048.
However, Deloitte superannuation lead partner Russell Mason said that sort of money will only sustain a comfortable retirement until age 77.
The million-plus balance will allow someone to live a modest life – devoid of such indulgences as overseas holidays, a nice car and regular eating out – till age 94.
‘‘To afford a comfortable retirement standard covering life expectancy, a current 30-year-old male would need a retirement benefit in 2048 of $1.58 million and a female $1.76 million,’’ Mr Mason said.
To achieve such a balance, today’s 30-year-olds would need to make additional contributions to super beyond the employer contribution, with men putting in another 5.4 per cent on top of their current rate and women adding an extra 7.5 per cent.
Hmmm. Couple of points. First, at an average inflation rate of 2% (being generous), in 35 years all costs will have doubled. So you can halve the Deloitte projections to give you an idea of the purchasing power relative to today: $550k in today’s dollars for a dude. Assuming we return to some kind of interest rate normalcy at 5%, that’s an income of $27k in today’s dollars to retire on. The quality of life offered up by that sounds similar to the Deloitte description.
But there’s a problem. The great likelihood is that taxes will be considerably higher in the future (and probably on superannuation too) owing to the declining dependency ratio over the next three decades (the number of workers to the number of dependents) that our baby boomer betters have failed to prepare the budget for:
In other words, Deloitte is being conservative about how much you need to save for a modest lifestyle.
