Alex

We acknowledge that we are recording this podcast from the lands of the Gadigal people of the Eora nation. We pay our respects to Elders past, present and emerging and celebrate the diversity of Aboriginal and Torres Strait Islander peoples and their ongoing connection to land and waters throughout Australia

Ange

Welcome to super simple chats, Rest’s very first podcast. I’m Ange..

Alex

And I’m Alex

Ange

And we will be speaking to industry experts about all things super.

Matt

Wait, what the hell is contributions as well?

Ange

I didn’t realise until recently, that super is invested, I thought it was like a savings account

Sarah

I’m not sure it’s helpful to talk about specific numbers, but it’s a lot less than a million dollars.

Person

This is actually really important to talk about, because I don’t want to miss out on those things

Ange

Trying to make it understandable and relatable for every day Aussies.

Alex

After all, it’s one of the biggest assets you’ll ever have.

Ange

Now this wouldn’t be a financial podcast, if we didn’t start by mentioning that the information discussed is general only and doesn't take into account your own financial situation, needs or objectives. This information and the relevant products are issued by Retail Employees Superannuation Pty Ltd. Before deciding to join or stay, consider the relevant Product Disclosure Statement and Target Market Determination at rest.com.au/pds and whether it is appropriate for you. While we have endeavoured to ensure the accuracy and reliability of the information provided, there may be inadvertent errors or omissions. Before acting on any advice, we recommend you speak with a financial adviser.

Ange

It can be really challenging to know just how much super you need to retire. So joining us today are Matt and Sarah from Rest who are going to be talking to us about planning for retirement and whether it really is true that you need $1 million to retire. So, Matt, Sarah, thank you for joining us.

Matt+Sarah

Thanks for having us

Ange

We're really excited to get knee deep in that figure and whether it actually is $1 million.

Alex

Yeah. So $1 million. That is quite an intimidating figure if we're, you know, living a bit more in reality maybe. What is an actual number that people should think about saving?

Matt

Yeah, I think yeah, I think that million dollars is, is something people like to talk about because it's a nice sort of claim number, a big number. But, realistically, it, it probably won't be that amount. It probably won't be $1 million. So, for me, when I was, you know, had this conversation with people, it, it really comes down to I suppose individual needs and wants in retirement. So, I think for me is sort of have a think about what you would like to do in retirement and how you're going to help yourself achieve this.

So, there's some, some friendly calculators available online that you know, with, with most super funds that you can access, and they'll probably give you a good guidance. And, look, if you're if you're not getting the answer out of those retirement calculators that you want, and it's not going to get you to Greece on that holiday that you want to do every year, then maybe have a chat with a financial advisor there to say it's, you know, to help you get along to that, to that retirement balance.

Ange

And I guess to Alex's point, if it's not $1 million, then is there something is there a ballpark figure that we should sort of be aiming for or recommended number.

Sarah

Yeah. So there's a, there's an association ASFA is the Association of Superannuation Funds of Australia. And every year since 2004, they've actually put together an estimate of what they call a retirement standard. And the way that they do that is they look at what's your expected spending or what's your anticipated spending work out therefore what your annual income is kind of likely to need to be.

Ange

So is that like considering cost of living in that period of time.

Sarah

So it looks at increase costs over time. It looks at what's the what's the most common expenses of people in in retirement because there are some that go away when you stop working. And so it looks at that and it sort of then extrapolates out to, well, about what's the income you need and therefore about how much super do you need to cover that.

And I'm not sure it's helpful to talk about specific numbers, but it's a lot less than $1 million. It does make some assumptions around that. You'll also probably get at least a part pension, in retirement as well, depending on your circumstances. And it does make an assumption about house ownership, but I think we might chat about that a bit later.

Ange

And I mean, look, I would love to retire with $1 million so that I can go and retire on the Greek islands. I just stole your retirement plan Matt, I know you want to retire in the Greek islands too. But how realistic is it that Aussies do retire with $1 million? And where does that number come from?

Matt

Yeah, this is a funny one. And I've had this conversation with so many people, out in the workplace. And I think the million dollar myth probably just comes around because it's a nice round, juicy number. I think $1 million is something that, for a number of years, financial advisors have suggested is that that goal, it's a nice goal to work towards.

But as Sarah just mentioned. Realistically, it's actually not that big of a number that you would need to retire with. But at the same time, there are other assumptions around, you know, you know, owning a house outright and not having mortgage repayments. And, you know, if you are a renter as well, obviously it makes it difficult as well.

So I think for, for me, I can't reiterate enough. It really will come down to your individual circumstances. And you know, what you want to do is if you want to go overseas a lot, you know, make those, those international trips, you probably need a little bit more money. You know, the conversion rate for, for most Aussies is not great right now.

Ange

It’s not great right now is it

Matt

Going to Europe or America or any place like that. Right. So yeah probably have a have a bit of a think earlier is probably best. I mean look if you, if you're looking at it closer to retirement that that's fine as well. But with anything to do with super, the earlier you can look at you know, your balance, some things that may, you know, incline that to a nice juicy balance come retirement, you know, it's going to be beneficial for you.

Sarah

And I think it's important to remember that… the value of superannuation is actually really high, even at those lower amounts, you know, the ability to hit retirement and actually do things like potentially pay off all you debt is, is a real win, even if it doesn't set you up to be able to go to Greece every year.

Alex

Sarah, you touched on this briefly before, and I'd love to deep dive a little more into this idea that a lot of superannuation models are based on owning property, but if we're being realistic, the dream of owning property does feel more and more out of reach for a lot of young Aussies like myself. And personally, my parents didn't actually buy their first properties until they were, my dad was retired for the first part and my mum was 60 something (age redacted, Sorry mum), but of older than that median age and not the typical situation. So I guess my question would be what does this mean for people who don't own property? Do they need a bigger balance to compensate for not paying a mortgage in that, you know, retirement income?

Matt

Yeah, I think it's it is really it's a really tricky, subject to tackle. To be honest, I don't think there's, a silver bullet answer to this either, if I've got to be honest. You know, I reflect on my own personal circumstances. I only bought my first ever property, a couple of years ago, and I've been working full time for a long time. Same with my wife. So, and, you know, living in Sydney, it's pretty tricky as well. So we were able to get an entry level property, but even still, then I've, you know, I've got another 30 odd years of potentially paying down that mortgage and all the rest of it. So I consider myself fortunate to be even getting into the market.

So for people that that are renting, you know, when it gets to retirement age, you may have to be, to be honest, more reliant on the government age pension along with your super balance as well. So there's a combination there… more super in there obviously, it's going to be beneficial for you to be able to do the fun things that you'd like to, but there is a bit of a fall back in the government age pension as well.

So, I don't think it is all doom and gloom, you know, type of thing. If you are, you know, retiring without, you know, a paid off house and you know, a small mortgage and things like that. There are other options. But, at the same time, as I said, if you are concerned about that, that you will be renting come retirement time, as I said, have a look at your super as early as possible. Seek financial advice… having a chat with them would probably one of the best things you can do to give you a little bit more peace of mind, sort of, as you get a bit older.

Ange

I just want to take us one step back. So, Sarah, you did mention that the ASFA models do have some considerations built into them. And that to Alex's point, one of them is property. Can you build on that a little bit.

Sarah

Yeah. So the retirement standard that ASFA put together do does assume that you own your own house and if and outright so you don't have mortgage payments.

Ange

Do you think that's going to change given the current climate that we're in with housing.

Sarah

Yes and no. It's definitely the case that fewer people hitting retirement own their home outright. It's that it's that's the trend. But it's off a pretty high level, over time, you know, even if people don't feel that they can access the property market as early as we used to be able to. There are still people buying their first homes over the course of their life.

Ange

Alex’s parents

Sarah

Yeah. That's right. So, so it's not it's not like homeownership has fallen off a cliff. But the demographics are changing around with, when people reach retirement, some don't own their own home, some still have a mortgage. And, and I think that actually talks to the value of superannuation to be able to actually contribute to that period of your life as well.

Ange

I might get cancelled for saying this, but at least millennials can breathe easy at night now, knowing that they don't have to own their home. They can have all the avocado.

Matt

It's always so much pressure. Millennials.

Ange

Yeah, just okay. So I'm going to speak to a similar point. And Sarah, this is more for you I guess. And this is probably going to get covered in another episode as well around women and super. But we're talking about people owning their own homes. And typically we're finding that, you know, older women are the ones that are either more homeless or they don't have their own homes. How is this impacting that particular cohort of individuals?

Sarah

Yeah, yeah. I mean, you’re right about those statistics in terms of, single women over 55 of the largest, are the fastest growing number of homeless people in Australia, which is devastating. But, I think there are there are ways in which to sort of produces manage, you know, this over time. So that risk is lower. And that's not to say that, you know, it's anybody's fault that they end up in those, those circumstances… and so consideration of a woman's superannuation balance is just as important as her spouse's, and, and so, there are options around to actually look at what you can do to, to even up the superannuation balance over your working life as well.

Ange

Personal anecdote is I was looking at my parents situation and mum took out quite a bit of time to look after us kids, when we were growing up. And now I look at the balance between mum and dad, and it's like the disparity is huge. And their wages weren't that different, both working class. But you kind of do the comparison of, what, 6 or 7 years out of the workforce can do to that final amount… And I guess lucky for mum, they did sell the house so they were able like, you know, a mum put herself in a good financial situation, but that's not the case I don't think, for every Australian.

So if you don't own your own home and you are in this situation, what are some of the things that you might be able to do?

Sarah

Yeah, look, leaning on your super to actually do some of this does actually help, because if you haven't got access to that, at least superannuation gives you an asset. So the, you know, you've got circumstances around things like co contributions or splitting contributions where you can build up that, that balance.

And also looking at, you know, where you've got broken work patterns during your working life. What can you be looking at to top up your super during those times as well?

Alex

Yeah, I mean, on the flip side of that, my mum was very much a corporate power woman of the 90s and took the least amount of time off, which I love and respect her for.

It was a great model for me, but her super balance, she will say, is a lot higher than those of like any friend that she has. And it just goes to show, like the situation's out of your control, that you can't really help you take time off before supers even compulsory, maybe two. Yeah, it can be a bit challenging for every different Australian. Everyone has a different story,

Ange

We actually took it out and spoke to everyday Aussies about this topic to see what they thought about it.

Sinem

Have you thought about your retirement and what that might look like?

Person 4

No.

Person 5

Think I'm just not worried about it yet.

Person 3

Not too young for that.

Person 4

No. Not really.

Person 5

Yes

Person 6

If I'm working in a job that I really love, then I wouldn't want to retire.

Sinem

How much do you think you need to retire?

Person 4

I have no idea.

Person 6

I do have a number that I'd be comfortable with.

Person 2

I never plan, like, you know how much I need by the time I retire.

Person 1

Probably like a $1 million.

Person 9

Realistically, I don't think that it will be millions. I think it will probably be a lot less,

Sinem

Are you at all worried about what your retirement might look like and whether you might run out?

Person 6

I'm not really worried about that now.

Person 7

Yes. This is exactly what I'm worried about.

Person 8

At this point, I try not to think about it.

Person 9

I am worried. So yeah a plan would be good.

Sinem

Back to you Ange.

Ange

So Sarah, this next one's for you. I want to ask what is driving the disparity between men and women in retirement at the moment?

Sarah

Yeah. It's an interesting problem, isn't it? And there's a whole range of causes around, you know, what we call the gender super gap and the causes that lead to that. Definitely. Career gaps is a big one where you've got rights to, to work. And, and the higher part time and casual work usually following, having a baby.

You also got women take on a higher proportion of generally unpaid work and caring responsibilities. And you've got on top of all of that, you've got a generalised pay gap across, the whole economy. And all of that leads to what's currently about a 28% difference in men's retirement balances compared to women's. So there are changes that are happening around this.

We've seen recently the removal of the threshold at which you get paid super by an employer. So it used to be that you didn't have to get super on your, on your salary until you hit a $450 threshold a month. That's gone. Awesome news

Ange

Is that $450 combined or from one employer?

Sarah

That was from one employer. So if you were earning a lot more across a number of employers, you weren't getting super.

Ange

Okay. So if you had like 3 or 4 casual jobs and you were working them all and none of them were quite hitting that threshold, then you might not be getting super on any of those.

Sarah

Absolutely. So that that's being fixed, which is fabulous… So, I think we'll start seeing some real differences to women's super balances as a result of that.

Ange

What else could women do?

Sarah

Well, the other thing is, from a government perspective is would we've also in Parliament now, is superannuation going to be paid on the Commonwealth scheme paid Parental Leave Which is awesome as well. But there are other options that you can do yourself in terms of just thinking about your super before you have those breaks and what you know, what can you do to top it up.

There are also options around, contribution splitting where you can actually as a couple, you can divide your superannuation contributions between both of you, and, and possibly get access to the government co-contribution scheme where you actually get government contributions for, the go on top of, of your, your personal ones. So that sort of range of things and I think a lot of it is actually just keeping it in mind.

Ange

Yeah. Great.

Alex

So we've established that that $1 million figure is a bit of a myth, and it's probably more about what you want your retirement to look like with a little a sprinkle of a caveat of it could be, you know, you might have a lower balance if you are a woman on average. So that being said, what are some practical steps you could actually take today? So you're in your 20s to potentially boost your balance if it's not where you think it could be?

Matt

Yeah, I mean, there's quite a few things, but I think what I would suggest to anybody when I, you know, speak to them about super for the first time is, engage with your super fund. And what do I mean by that? It's super easy in this day and age to engage with the super, in a sense that most… funds will have an app. So that is the first thing I've always said. Everybody download the app of your respective super fund. I know most people have a smartphone. So, you know, most people are familiar with apps as well.

So if you download the app of your respective super fund, you know, you can see your balance, you can see your contributions from your employer. Make sure that they're paying the super, which is obviously important to, and then you can see your balance grow as well. So I think when you do that, it makes it a little bit more real, a little bit more tangible.

When I first started working in super, I used to work in a call center, and people used to have to call through to the call center to say, hey, Matt, can you give me my balance as of today? And I would write out a script, and I would read out their balance, and I would write it down, and then they'd read it back to me and I said, no, no, no, that's wrong.

And then we read it out again. And then they would go off on, on, on their day and I would have probably five, six, seven, eight, nine, ten of those calls a day. So, you know, engaging with these super is probably the best thing you can do. And as I said, downloading the app of a respected fund is the probably the first point of call.

The other thing to consider, and I think for me, it's certainly it's a, it's a tricky topic in the current climate because cost of living, is not going anywhere in Australia. It's a global issue at the moment. But one thing we generally like to say from, from people, if they can afford it, is contributing extra to their super, and you can do that through various means, one called salary sacrifice. Where you can sort of, you can sit down with your employer and ask them to forgo some of your salary and put it into your super, either a percentage of your salary, or a figure amount. But once again, you know, this is only one thing to consider, if you can afford.

I'm very mindful of, how much two bags and shopping still costs. I think for me, I went to (won’t name the grocery store), but I went to one just last night and got two bags in shopping and it was $90.

Ange

We’re all feeling that pain Matt, don’t worry.

Matt

That that that pain is real at the moment. So very conscious of that. But, you know, figures will show and the calculators will show that such a small difference now will make such a big difference over time. And you'll have this friend of ours called Compound interest working away in the background.

Ange

That sounds like a friend, I'd like to have.

Matt

Oh, yeah. It's a great friend. And, you know, five, $10 a week, over 30, 40 years. You know, can make such a big difference in your retirement. And, you know, if you, if you're going to start to look to contribute more, you super once again, take advantage of the advice that's available to you via your super fund advisors are more than happy to run through what an extra 5 or $10 a week will make in retirement. Because I know at the end, based off their calculations, it'll be a lot more than if you didn't. So I think for me, they're probably the two key things. You know, really basic fundamental things engage with the super via ideally their app. If they don't have an app, have a look online. Most super funds have an online portal where you can check it just like your bank account. And then the second thing would be, if you can afford it, additional contributions and then the benefits of that too.

Ange

One thing I'd like to speak to, I guess ask the question around, is, I guess, the differences in what retirement looks like for everybody. So my understanding is that there is an age at which you can retire, but there are different ways with how you can retire. Can you explain this to me a little bit more detail?

Sarah

Yeah. So the official what we call the preservation age for super… that’s a government mandated age looking at, when you can access your superannuation… but what we're seeing now is that people's retirement all looks incredibly different. So the old, the old idea of retiring at 60 or 65 and working full time until you stop is actually really going out the window, is a is a general trend. So you people drop down to part time. They look at, they look at different jobs. One of the biggest, employers of old people in Australia is Bunnings. And these are frequently professionals who retire from their corporate life and go and work at Bunning two days, Bunnings two days a week. It's an incredible trend.

Alex

I love it. I think my Dad would like to do that as well.

Sarah

So yeah. So it all looks different

Matt

I think as well. It's a good point as well. You know come retirement you know often unfortunately you don't retire with the amount that you, that you'd like to and you do have to work. But I think, in retirement I've got some ex-colleagues that have now retired. And I think for me, they've always said to me, they've got to find that sense of community in retirement, which is, which is really important as well, because I think if you're just doing, what's referred to as a three G’s, which is gardening, grandkids and golf, which sounds amazing.

Ange

I mean, that sounds amazing, right? Where do I sign up?

Matt

That sounds amazing, but I think for me, you know, it's often finding, you know, what else? What else can I do? So if you do have to go back into the workforce and get a two day job, you know, a week at Bunnings, I think a lot of people enjoy it. You know, it's not like, you know that you have to be in the office five days a week or, you know, digging holes five days a week type thing. You're able to work in a workplace which is fun, vibrant. You've got, you know, some new colleagues and, you know, with that becomes more of a social network too.

So there are obviously some, some, some upsides to, you know, going back, it's I wouldn't say it's the worst thing having to go back and work a couple of days a week.

Ange

So actually just before this episode, Sarah, we were talking about your mum and how retirement looks a little bit different for her as well. Can you tell us a bit more about mum's story?

Sarah

Yeah, absolutely. My mum was an academic, and a nurse before that and then an academic in, in nursing. And, and she continued working well after 70, but it, it staged down. So she went from teaching a lot of a lot of classes, to, you know, working with the university on research to and then dropping, down again to just supervising a couple of students. And really, she only fully retired, I think, when she was 72.

So it's, it's absolutely, available in lots of different workplaces that there is this pattern of not fully letting go over the course of, of the end of your career.

Alex

I feel like we've established then not only have we busted the myth of a perfect round figure, but the idea of a perfect retirement plan that everyone's looks different.

Matt

Yeah, everyone certainly is different. So I think, hopefully that gives people listening to this some somewhat peace of mind in terms of, you know, not having to reach that big, juicy million dollars or even more. I think a lot of people might think you might need a more than $1 million, but it's, you know, certainly not the case. And it'll come down to the individual. Right.

Alex

And also the idea that if you can't afford right now to contribute to your super, because that tends to be the one silver bullet answer that it's okay that we're all feeling a bit of the crunch at the moment, and maybe instead just start from step one, which is engaging with your super.

Matt

Yeah, correct. There's plenty of things you can look at with your super and most super funds will have. So, you know, so many tools and calculators and things available for you at your disposal. So, look, I know it's probably not the first thing people think of when they get home from work is to jump online and have a look.

Ange

No, really?

Matt

I mean, that's what I do, right? Okay. But look at, as I said, if you want to help yourself, you know, I'd certainly have a play around with it and speak with your super fund. If you don't want to speak to somebody on the phone, you don't have to do this so many ways. You can do it digitally now as well. There's even things like digital advice services available these days. So, you know, please take advantage of it.

Ange

Thank you again to both of you for coming and joining today's episode.

Matt

You're welcome. It's been awesome.

Ange

Thank you. And, Sarah, I'd love to dive in a little bit deeper into that. Women and super topics. That'd be great to have your back. Oh, yeah. For another episode.

Sarah

Okay, let's do it.

Ange

Amazing. Lock that in, guys. You heard it here first.

Ange

So please make sure to like, follow and subscribe

Alex

For any more information on the things we spoke about today there’ll be some links in the description below.

Ange

And that is..

Ange&Alex

Super Simple!