Unless Australians dramatically increase their Super contributions they will be heading for trouble, as they will have insufficient funds for their retirement.
Even without the ravaging effects of the financial crisis, anyone who is relying on the basic 9 per cent super guarantee for their retirement savings is unlikely to accumulate enough money for a comfortable retirement.
A retirement shortfall of $80000 per person has been estimated nationwide. To prevent a retirement crisis industry groups are calling on contributions to be raised to a minimum of 12 per cent.
Unless you make your own contributions into your super fund you could find yourself in dire straits.
How much money is required for a comfortable retirement, and how much does one need to save to get there?
A survey recently conducted by the Association of Super Funds Australia (ASFA) and Westpac has shown that a comfortable retirement requires an annual income of almost $40,000 for a single pensioner and $50,000 for a couple.
To obtain this level of income requires saving a lump sum of $400,000 to $500,000 by retirement this is not as easy as it seems.
A typical example is somebody aged 45 who has not salary sacrificed any extra money into their super, but who then puts an extra 3 per cent a year into their fund, will run out of money by the age of 79, leading to be poor for the remaining years of their lives.
Another good idea for retirement targets is to aim for an income of around two-thirds of your final salary.
Somebody who has left it too late and is aged 50, earning the slightly less than average wage of $50,000 a year will need to contribute an extra $14,000 a year, in addition to the super guarantee.
Since July, 1, the Government halved the annual allowances for super contributions, making it even harder for those savers who left it late to catch up. For anyone aged over 50, the maximum they could contribute has been cut from $100,000 to $50,000 and for anybody under 50; it is $25,000 including the 9 per cent guarantee.
ASFA has stated that the Government is blocking responsible retirement planning with the survey finding that the average earner aged 55-64 has just $142,000 in their super fund.
Sadly, when people are older and have paid off their mortgage and are in the situation where they have more money to set aside, the new government limits means that they are unable to put enough aside. This Super system needs to be adjusted to take into account peoples lifestyles and today's realities.