3 months ago
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Young Australians grappling with rising living costs are over-estimating how much they will need by the time they reach retirement by over $30,000, with research showing a sharp rise in retirement income expectations for Gen Zs and Millennials.
The survey, conducted by Vanguard, shows that 25 to 34-year-olds believe they’re going to need $106,000 a year per household to live comfortably in retirement. This is up from $96,000 in the survey conducted in 2024 and $66,000 in 2023.
Melbourne’s Erin Doyle (middle), in her mid-30s, has been stashing away an extra $250 in superannuation in voluntary superannuation contributions for years.
It’s hardly surprising that young people have a particularly pessimistic outlook on retirement and feel that a comfortable retirement is way out of reach despite the super guarantee rising to 12 per cent in July this year.
Cost of living issues have hit younger people hard, with rising rents, the price of groceries and the growing cost of eating out a constant battle, Vanguard Australia managing director Daniel Shrimski says.
Rental inflation is also a major factor. The national median advertised rent climbed to $630 a week in the March quarter, marking a 5 per cent increase compared to the same time last year. This equates to an annual rise of around $1560 for tenants.
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“Young people might also be thinking ahead about rising housing costs, healthcare and basic expenses, especially if they expect to work together or live longer than previous generations,” Shrimski says.
“We also think that younger Australians could be overestimating what they’ll actually need for retirement because they just haven’t done much retirement planning yet, or they’re finding it difficult to imagine their finances so far in the future. They probably don’t have a clear picture of what they’ll actually need down the line.”
“We’re also seeing that many Australians are expecting to retire with a mortgage, with one in three millennials and one in four baby boomers anticipating they’ll carry a debt into retirement.”
However, some young people are heeding the warnings. Melbourne’s Erin Doyle, in her mid-30s, has been stashing away an extra $250 in superannuation in voluntary superannuation contributions for years.
Her workplace might pay her super regularly, but she’s convinced that she’s going to need more by the time she reaches retirement age. “I basically forget that I even earn it because I never even see it when I’m paid,” she says.
Mary Delahunty, chief executive of the Association of Superannuation Funds of Australia.
“From a very young age, my parents drilled into me that superannuation was critical, so it has just always been something I’ve done. I know it will eventually become a nest egg of funds that will allow me to go travelling and experience the world after I’ve worked all these years. Occasionally, I go and have a peek to see how much it’s grown, but otherwise I just leave it.”
The CEO of the Association of Superannuation Funds of Australia, Mary Delahunty, isn’t surprised that young people are worrying about their super.
“Young people saving today have many financial pressures. They’re wondering when their job will exist and whether their wages will keep up with inflation,” Delahunty says.
The retirement income standard has risen again this quarter. ASFA says couples will need $75,319 for a comfortable retirement, and $53,289 for singles. Delahunty attributes the cost growth to steep cost of living increases. The growing cost of private health insurance, electricity costs and groceries have also contributed to the jump.
Retirees are also spending $58 per week just on digital connectivity per week, with smartphones, streaming services and high-speed internet now standard budget items for older Australians.
“Given that the superannuation guarantee has risen to 12 per cent, a 30-year-old worker today can have confidence that their money in their superannuation account is on track for them to have a comfortable retirement,” Delahunty says.
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