Experts have warned that Australian super savers will face significantly lower long-term superannuation returns as depressed markets make it virtually impossible to reach the growth targets people now expect.
Retirees and investors in their 50s are also being warned to prepare for returns up to 2 per cent lower than long-term averages. While this may not sound like a big drop at first glance, it can equate to losing tens of thousands of dollars for those who happen to be retiring when the market is in motion.
For example, if a 50-year-old on a salary of $150,000 wanted to retire at 65, and already has an average superannuation balance of $250,000, his portfolio would return $111,000 less at 5 per cent over the 15 years than it would at 7 per cent. To make up for this shortfall, the 50-year old would have to work for at least another two years.
For those planning to retire in the next decade, the market’s current situation may mean that they will have to work for longer, minimise their spending, release equity through downsizing or become more reliant on the aged pension.
Some industry professionals are encouraging pre-retirees to consider delaying their retirement, even by six to 12 months, to cushion their portfolio. For investors, particularly those with self-managed super funds, it may also be worthwhile considering growth stocks instead of strong dividend payers.