Good money management during your working life can pay big dividends for your post-work lifestyle. Not only can you use your extra savings to boost your retirement income, not having large debts at retirement lets you use your super to fund your lifestyle instead of paying off these debts.
Using super to pay off debt can leave you short changed
Poor saving habits mean that even if people do manage to save a considerable amount of super, they may end up using most of it to pay off credit cards and the mortgage1, rather than using super to fund their retirement.
This can leave them without enough savings to enjoy the post-work lifestyle they imagined. What can be done to reverse this trend?
Unfortunately, few of us were taught good savings habits at school. As a result, many Australians retire in a poor financial position.
Savings outside super can significantly boost your retirement income
Research2 has found that without additional savings, only 15% of couples and 5% of singles will enjoy a comfortable retirement income, as defined by the Australian Superannuation Funds of Australia Retirement Standard.
However, when you add the government age pension, these figures rise to 32% of couples and 11% of singles having a comfortable income, and adding additional savings outside super means 53% of couples and 22% of singles are on track for a comfortable retirement.
This shows how important it is to have healthy savings habits beyond your super savings or relying on the age pension.
1The lump sum: here today, gone tomorrow, AMP.NATSEM Income and Wealth Report Issue 7 March 2004
2Retirement adequacy – the need to look deeper, Towers Watson and the University of Melbourne, 2014