SMSFs in or transitioning to retirement remain appropriately positioned to reach their retirement goals, but more savings in super are required now due to a weaker investment outlook, a new report from the SMSF Association and Accurium has revealed.
The “SMSF Retirement Insights: SMSFs Treading Water” September 2017 report analysed Accurium’s database of over 65,000 SMSFs, approximately 130,000 trustees, during the 2016 financial year.
The database represents SMSF households that are in or phasing into retirement.
The sixth volume of the report revealed due to a weaker investment outlook that indicates returns will be lower for longer, SMSF retirees will need more savings to achieve their retirement goals.
The amount needed for a 65-year-old SMSF couple to afford a comfortable retirement, as defined by the Association of Superannuation Funds of Australia (ASFA), increased by 17 per cent from $702,000 to $824,000.
Over time, the quality and cost of someone’s desired lifestyle increases, as reflected in the ASFA budget standards, meaning SMSFs need more money today in order to afford the same desired lifestyle, the report said.
However, 66 per cent of SMSF trustees can remain confident – with an 80 per cent probability – that they are well placed to live comfortably in retirement on $60,063 a year.
At a higher spending level of $70,000 a year, 50 per cent of SMSFs can be confident of achieving this goal, while 39 per cent can be very confident of doing so.
The report also found the median desired spending level in retirement for an SMSF couple is $78,800, up from $75,000 last year.
However, 24 per cent of SMSF couples aim to spend over $100,000 a year in retirement.
At this aspirational level of $100,000 a year spending, 28 per cent of SMSFs can be confident in achieving this goal, while 20 per cent can be very confident.
The report said the median balance for a two-member SMSF at retirement rose to $1.137 million for the 2016 financial year, compared with $1.124 million in the previous year.
SMSF median balances at retirement have risen 17 per cent since 2010.
“SMSF balances over the year to 30 June 2016 increased only modestly, only 1.2 per cent, and that was based on an imputed investment return of 1 per cent,” Accurium general manager Douglas McBirnie told a media briefing in Sydney today.
“So future returns were reflective of a weaker year in investment markets and those returns are before tax but after expenses.
“That all being said, the balances of SMSFs are still pretty healthy and SMSFs are in a good place to meet a comfortable retirement lifestyle.”
SMSF Association head of technical Peter Hogan added that the idea of the research was to paint a picture of how well placed SMSFs are in meeting their retirement goals.
“It does highlight some challenging times for SMSFs, but also for the superannuation industry generally,” Hogan noted.
