Published on September 18, 2015


Australians and their retirement funding shortfall

Of 15 countries surveyed recently,  Australia had the largest retirement funding gap, believing they will spend 23 years retired but will run out of money after just 10 years. We know we need to do something but how do we get the most bang for our buck.  Our cash is limited yet, most of us have a compulsory savings plan that is not being utilised to its full potential.  Would you rather a 5% return on $150,000 or 5% on $450,000. Read on to find out

Australia’s retirement savings gap sits at amongst the world’s largest according to a new survey produced by the HSBC for “The Future of Retirement” report. In Asia we are number one for having the longest gap to fund our retirement and on a world scale we are number four.  The number of Australian pre-retirees that reported they will not be able to adequately fund their retirement was over 45%.

A survey for industry super fund REST in 2014, found 35 per cent of baby boomers described themselves as "completely unprepared" for retirement, 51 per cent as "somewhat prepared" and only 14 per cent as financially prepared.

The Head of retail banking and wealth management at HSBC Australia said, "Australians are in denial about retirement planning. Life is full of reasons for putting short-term spending before long-term planning”.

That’s scary when you realise the maximum retirement pension is a mere $648.40 per week for a couple or $324.20 for a single IF you have no assets, no cash, no other forms of income whatsoever.  

There is a solution and it is right at your fingertips.

None of us really wants to sacrifice today’s lifestyle for tomorrow’s comfort.  However for many of us, you may not need to.  Leverage according to the business dictionary is “The ability to influence a system, or an environment, in a way that multiplies the outcome of one's efforts without a corresponding increase in the consumption of resources. In other words, leverage is the advantageous condition of having a relatively small amount of cost, yield a relatively high level of returns.”

Our current cash and ability to use that cash for the future is limited by not only the demands of your current lifestyle but the rate at which you can save to meet what is required ie. saving to pay cash for a house or funding our future.

Turbocharge your super

Compulsory saving was introduced through Superannuation but was still limited until 2007 when the then Treasurer, Peter Costello recognised that as people saved money inside superannuation, even though balances may have been growing, they had no capacity to leverage.

That meant even a great return on $150,000 was still only a return on $150,000. By amending legislation to allow for limited recourse borrowing inside of the superannuation environment, someone (or two, three or four people who decided to combine their super balances) could turn their balance into a deposit and leverage into a significantly more valuable asset and earn a return on the value of the total asset rather than merely their deposit.

Leverage is one of the secrets of the wealthy.  It is one of the great tools that we can use to take control of our own future.  And with a SMSF (Self Managed Super Fund) we are able to utilise funds which  don’t impact your current lifestyle and are already sitting there doing very little and are at the mercy of the big retail and industry super funds and their many fees.

Why pay tax if you don’t have to?

Like any form of investing, property is a vehicle to an end goal. But what makes the whole notion of property investing inside of superannuation so appealing to many is that, once you are over 60 years of age and retired:

  • There is no income tax payable on income earned
  • There is no capital gains tax (CGT) payable on assets sold

The opportunity for people to roll out of a retail or industry superannuation fund and move their super balances into a self-managed superannuation fund (SMSF) has existed for a long time. But when Peter Costello changed the rules back in 2007, your ability to leverage your balance to control a larger asset opened up.

Let me add a word of caution here. In everything you do you should act responsibly and exercise care at all times. Explore your options, find out what is possible. Create a future you can look forward to and bridge that retirement funding gap. Our team of internal and external experts can guide you through the maze, keeping it simple and verycost effective!

Most importantly - do something!

Time is ticking; it’s time to act

To discover what may be possible  in your situation to turbocharge your super balance to bridge your retirement funding shortfall call MRD on 1300 883 854 or using the hashtag  #turbochargemysuper contact us here.

Partnering with you for your investment success,

Nick Lockhart