Adequate super amount overestimated

comfortable retirement

Individuals tend to overestimate the level of savings they need to fund a comfortable retirement, a senior financial adviser has said.

A senior adviser has revealed that in his experience individuals tend to overestimate how much money they need to save to facilitate a comfortable retirement.

Speaking during a recent retirement planning panel webinar hosted by The Financial Link Group, Zenith Wealth Management director Peter Chun said: “Something that I’ve come to realise in recent times is the perception of possibly how much we actually need [in retirement] is not necessarily correct. We don’t necessarily need as much as we think we [do].

“It’s something I’ve found over the years that people’s perception of [needing] $3 million, $5 million or whatever, it may be is [inaccurate].

“The reality is when we break it down and get into that financial cash-flow modelling and look at their expenses and the sorts of things they want to do in retirement, [for example] an overseas trip a year or whatever it may be, the required money for that is in a lot of instances a lot less than they ever imagined.”

According to Chun, this mindset results in a real sense of pressure on individuals as they go through their superannuation accumulation phase during their working lives aiming to achieve an unreasonably high level of savings for their retirement years.

“It’s not necessary in my experience,” he said.

Fellow panellist and practice owner David Siostrom noted a lack of recognition of the Australian social security system also plays a part in people overestimating the amount of money they need in retirement.

“It acts as a bit of a backstop in that if people are drawing down some of their own savings over time, they may get to a point where their assets and income are at a level such that an age pension kicks in and replaces some of that income,” Siostrom said.

“That scenario can also work very well and is something we need to take into account when looking at the affordability of lifestyle funding over a full lifespan.”

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