More Young Australians on Track for Comfortable Retirement

Australia’s superannuation system is placing young Australians in a better position to retire comfortably, though many older workers may still struggle to build enough savings unless they act soon.

Today’s under-30s are on track to accumulate sufficient superannuation, helped by compulsory contributions and growing financial knowledge. Many older Australians, however, are falling short of the savings needed for a comfortable retirement.

Super balances have increased steadily, driven by employer contributions now set at 12% of wages from July 1. This change means younger workers with long careers ahead can build much larger super balances than those who began saving under lower contribution rates. Older generations missed out on consistent contributions throughout their working lives, creating a gap in retirement preparedness.

Data from the superannuation sector shows that individuals need $595,000 in super to retire comfortably if single and $690,000 if part of a couple. These figures assume the individuals own their home and receive partial age pension support. They also cover common lifestyle needs such as private health insurance, some travel and faster internet. Yet, the average balance for Australians aged 60 to 64 is much lower, currently about $395,000 for men and $315,000 for women. Median balances are even lower, at $220,000 for men and $163,000 for women.

Despite this gap, the outlook is improving. Around 30% of current retirees meet the comfort benchmark. A decade ago, that figure was 25%. By 2050, it is expected that 50% of couple households will reach this benchmark thanks to improved policies and the long-term effects of earlier compulsory contributions.

Australians now have access to planning tools through their super funds and government websites, helping them estimate whether they are on track for comfortable retirement. Industry projections show that a 25-year-old with $26,000 in super today is likely to hit future targets. Ideally, a 30-year-old should have $66,500 in super, growing to $296,000 by age 50 and $469,000 by age 60, assuming an annual salary of $65,000.

Financial experts suggest steps to boost super balances. These include reviewing fund fees, making additional contributions through salary sacrifice, seeking financial advice and actively managing super accounts. These actions can help align savings with retirement goals and improve overall outcomes.

The increase of compulsory super contributions to 12% is expected to deliver strong results. A 30-year-old earning a median salary of $75,000 could reach $610,000 in super by age 67. This would exceed what's required for a comfortable retirement and may reduce future reliance on government pensions, easing pressure on the federal budget.

Australia’s superannuation system is working well, especially for younger generations. With better online tools and greater financial awareness, more Australians are preparing for retirement and putting themselves in a stronger position to maintain their lifestyle after leaving the workforce.

Source: Australian Prudential Regulation Authority (APRA), KPMG Australia, The Australian

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