Super funds return to growth but retirement gets more expensive
Rising inflation meant retirees would need a bigger nest egg to provide a comfortable retirement, according to the Association of Superannuation Funds of Australia.
Superannuation funds currently hold $10.4 billion in lost super while the ATO holds about $5.6 billion, which is a 40 per cent increase since 2019. (Image: Ivan Samkov/Pexels)
Its September quarter figures showed retired couples near the age of 65 would need to spend $68,014 a year for a comfortable standard of living.
That was up 6.6 per cent over the 12 months to the end of September. A single person would need to spend about $48,266, a rise of 6.6 per cent.
ASFA assumes in its calculations that retirees have no remaining home loan debt.
The increase in standards has outpaced the growth of superannuation funds, which grew by 3 per cent in October. Added to that was another 1.1 per cent growth so far in November.
The cumulative gain so far this financial year was 3.5 per cent, which Chant West said would effectively wipe out last year’s losses.
Chant West senior investment research manager Mano Mahonkumar said shares were the main contributors to growth.
“Over the month (October) Australian shares surged 6 per cent while international developed markets were even stronger, advancing 7.2 per cent and 7.8 per cent in hedged and unhedged terms,” he said.
“Emerging markets were a detractor, losing 2.6 per cent.”
Bond markets were also mixed. Australian bonds were up almost 1 per cent but international bonds were down 0.4 per cent.
He said the median growth fund was about 11 per cent ahead of the pre-Covid high in January 2020.
It came as a survey found that the number of Australians who believed they would not have enough money in retirement had increased significantly.
The Investment Trends survey of pre-retirement age Australians found that inflation was a major worry, with 42 per cent concerned about rising costs compared with 28 per cent in 2021.
When faced with the question about how much cold, hard cash they would have in retirement, most people believed they would not have enough.
Medical costs were another increasing concern, with 43 per cent of people citing them as a worry in 2022 compared with 32 per cent in 2021
Only half of those surveyed believed they were financially and emotionally prepared for retirement compared with 76 per cent in 2021.
As a result, those moving towards retirement are becoming financially more cautious.
“We are starting to see non-retirees making plans to reduce their spending and delay the start of their retirement in order to close this retirement adequacy gap,” said Dougal Guild, research director at Investment Trends
