Author: Greg Alder - .au
Why we lie to ourselves about how much we’ll need in retirement
In their books, Freakonomics and Superfreakonomics, economist Steven Levitt and journalist Stephen Dubner look at a host of phenomena and try to explain their existence from a statistical or economic perspective. In the first of their books, one of the things the authors looked at was online dating services. Specifically, they wondered if users of these services were truthful about their personal details.
What Dubner and Levitt reveal is that online dating service customers exaggerate their height, their looks and intelligence and understate their weight to lure potential partners. The motives are pretty clear - to give themselves a better chance of a response. If an online dater is brutally honest about his or her appearance, intelligence or wealth, how many replies do you think there would be?
The lie only works until the first face-to-face date, when the short, fat, dumb truth is exposed. Since both parties are likely to have exaggerated, neither comments on the other’s lies.
Is there an underlying inability to face the truth about ourselves? Might it also explains why so many Australians underestimate how much they’ll need in retirement?
Do you have to fight human nature to retire in comfort? Statewide Super’s CEO, John O’Flaherty, wrote recently in the Adelaide Advertiser on the subject of Australians underestimating how much they will need for a comfortable retirement.
The numbers are scary. Based on current average annual returns, a couple would need close to $1,000,000 in super savings to live comfortably in retirement.
A single person would need close to $800,000.
So much for the ideal. Now let’s look at reality.
Only 10% of Australians have more than $100,000 in their super accounts.
MILLIONS OF 35-44 YEAR OLDS WILL STRUGGLE IN RETIREMENT
To quote from a 2007 report by the Association of Superannuation Funds of Australia;
“On the basis of the current average superannuation balance and average income of those aged 35 to 44 and the assumption of only compulsory superannuation contributions being made, the average retirement superannuation payout at age 60 for a male currently aged 35 to 44 would be $183,000, while for a female it would only be $93,000.”
Based on these figures an average 35-44 year old couple would be $750,000 short when they retire.
Fund statements will start arriving soon. They will reveal how far away from your savings goal you are. Do not think you can afford life’s little luxuries if you haven’t managed to accrue $1,000,000 as a couple by the time you retire. If you’re at all concerned about reaching this goal, review your super investments. Talk to your super fund or use the SuperSavvy tools to find a better performing fund. Start your search by reviewing the Top 10 Performance funds.
The statements will also reveal the fees you are paying. As we have written before, a 1% reduction in fees paid can add as much as $100,000 to a super account over a 30 year period. See the funds that rate best for low fees Top 10 Fees
If all else fails, get advice. And nobody gives advice as impartial, unbiased and brutally honest as we do at Savvy. Contact us for Advice.
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