Retirement Planning for Gen Z Australians Needs Attention

Retirement is not a primary concern for many Gen Z Australians, but experts emphasise its importance.

Zoomers, defined as those born between 1997 and 2012, have recently surpassed baby boomers as Australia's most financially confident generation. However, money manager Alex Jamieson notes that many are overlooking their superannuation, one of their largest financial assets.

“Most millennials and Gen Z are what we term 'disengaged super fund members', as they show little interest in their super funds and rarely check their balance,” Jamieson stated.

Currently, the average Gen Z individual has between $7,328 and $25,981 in their superannuation. Jamieson advises that actively managing this capital rather than simply accepting default investment options can significantly impact retirement benefits.

For instance, a simple shift from a 'balanced' to a 'growth' investment option could result in an additional $277,360 at retirement for someone starting with $7,328 at the age of 25.

Research indicates that many Australians lack a basic understanding of superannuation. Seven out of ten do not know the super guarantee rate is 11.5 per cent, and nearly one-third check their balance just once a year.

In 2024, the Super Members Council will launch a public awareness campaign to clarify superannuation's mechanics and its long-term benefits.

“Most workers today were not in the workforce when super was legislated 32 years ago, making this initiative timely,” said council chief executive Misha Schubert.

In addition to Gen Z and millennials, the advice could also benefit retirees. Recent findings show about 700,000 retirees are paying excessive taxes because their super accounts have not transitioned into the tax-free retirement phase, resulting in losses of around $650 per year.

Research from Finder revealed that 16 per cent of Australians have postponed retirement in the last two years due to rising living costs. More than 800,000 do not have sufficient funds to retire comfortably.

“Australia is facing a growing retirement savings crisis,” warns Finder's superannuation expert Pascale Helyar-Moray.

According to the Association of Superannuation Funds of Australia (ASFA), the median super balance for men aged 60-64 was $205,385 in 2022, while for women it was $153,685.

Singles need $595,000 to retire with a comfortable lifestyle, whereas couples need $690,000. A 'modest' lifestyle requires $100,000 for singles and couples alike.

Jamieson insists that most Australians have the tools to boost their super but fail to leverage them.

• Negotiate increased super: Many receive the minimum superannuation from their employers, currently set at 11.5 per cent. Negotiating a higher percentage can benefit wealth growth through compounding.
• Salary sacrifice: This strategy allows employees to direct a portion of their pre-tax salary into their super account, benefiting especially middle to high-income earners.
• Check employer contributions: It is critical to verify that employers are making correct super payments. The ATO takes this matter seriously.
• Consider a switch: Finding a super fund with competitive fees and investment options that aligns with personal values is also advisable.
• Seek professional advice: All ages should consider financial advisers for better management and decision-making regarding their super.

Time is of the essence, and the sooner employees take control of their superannuation, the better their long-term financial outcomes.