Claims that super balances of $1 million or more were needed for a comfortable retirement are causing unnecessary fear and concern among many older Australians, AIST and AustralianSuper have said.

An AIST and Vilder Policy and Research (VPR) paper, entitled Busting the $1 million retirement myth, has been published to “debunk the myth that $ 1 million is necessary for a dignified retirement and provide much-needed clarity about how even small amounts of super can make a big difference in retirement”.

The paper makes the argument that averages rarely provide the true picture, while the median can be much more useful in communicating with members. The current median for a person approaching retirement in an industry fund is $100,000.

The paper says the claims that $1 million is needed in retirement fails to take into account the role of the Age Pension, one of the pillars of retirement, and ignores how super was designed to work.

As most Australians won’t reach anywhere close to $1 million – it is estimated less than 1 out of every 200 (or 0.5 per cent) members of APRA regulated funds will achieve this figure –  the debate needs to shift onto how super can boost retirement income, AIST said.

Tom Garcia, chief executive of AIST, said: “The reality is that most Australians – including most of those starting out in the workforce today – will not retire with the equivalent of $ 1 million in super. We need to stop focusing on the needs of a privileged few and start talking about how relatively small balances of super can still make a big difference to the quality of life in retirement.”

A super retirement balance of $150,000, for example, delivers an additional $163 week on top of the Age Pension – a 38 per cent increase.

Meanwhile a worker on the median income of $55,000, can expect to retire with a tax-free retirement income of $34,000 – which is 79 per cent of his or her take home pay.

“It’s time to get real about super and ensure all Australians have a far better understanding of the sort of income they can expect in retirement. Super doesn’t exist in a vacuum. Most people approaching retirement will draw an income that is a combination of both super and the Age Pension,” Garcia said.

AustralianSuper chief executive Ian Silk said members were getting mixed messages about the sector which was causing disengagement and uncertainty.

”The key point for people to appreciate is that even relatively modest super balances can make a meaningful contribution to an adequate retirement income when combined with the Age Pension,” Silk said.

“So rather than despair, workers with $100,000, or even $50,000 in their super accounts should take heart. The super savings they’ve accumulated give them options they might not realise.”

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