The recent government decision to back down from introducing higher taxes for the 'well-off' on superannuation has highlighted concern that using the figure of $1 million in retirement savings as an aspirational wealth benchmark is unhelpful.
Australian retirees must be encouraged, not penalised, to grow significantly larger retirement funds. By 2043, the $1 million figure will need to be at least $2.5 million after inflation for a comfortable retirement, according to Chan & Naylor director Ken Raiss.
"During recent weeks of political tax grab barracking, the government has successfully managed to stigmatise Australian retirees who have managed to set aside their own monies for independent retirement whilst simultaneously eroding the public's confidence in super as a mechanism to plan for the future," Mr Raiss said.
Constantly changing the rules and limited concession opportunities have meant that many people are shunning investing in their super and instead putting their money into more risky investments - or simply spending it.
Mr Raiss welcomed the Opposition's declaration that it will not put any further tax imposts on super should it come to power. He warned, however, that to avoid a national crisis in which retirees simply run out of money halfway through their retirement, future governments must restore public trust and confidence in super.
"The alternative to this is that new and extreme contingency measures may need to be considered," Mr Raiss said. "This will likely include the incremental increase of compulsory employer contributions from nine to 15 per cent or more in 30 years or less, and as we continue to grow older the official age of retirement may need to be extended from 65 to 70."
Not all responsibility, however, should rest with the government, he added, and urged all Australians to begin aiming to improve their own financial wellbeing.
Done properly, this would include assessing all aspects of personal finances, including savings, a review of insurance policies, strategies to boost retirement investments, staying ahead of tax obligations and making an effort to improve financial literacy to better plan ahead.
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