New research suggests the early super hit to retirement incomes could be exaggerated, with most Australians likely to enjoy a comfortable retirement despite digging into their superannuation early.
Retirement incomes will still fall for workers who withdraw their super early, but that cost will be offset by higher aged pensions, according to the Grattan Institute.
“Someone earning the median wage of about $60,000 today can expect their total super income through retirement to fall by about $80,000 in today’s dollars,” said Grattan household finances director Brendan Coates. “But their total retirement income would fall by only $24,000 in today’s dollars, or about $900 each year, because their lower super balance at retirement would be largely offset by larger pension payments.”
Mr Coates believes a higher aged pension would still cost the federal government less than extra super tax breaks that result from an increase to the super guarantee, and that increasing the guarantee now would reduce take-home pay and widen the gender gap in retirement incomes.
“System defaults like the rate compulsory super need to be set so they work for most Australians,” Mr Coates said. “And while around one in five Australians have accessed their super early, that leaves four in five that haven’t.
“[Policymakers] can only justify forcibly lowering someone’s living standards during their working life – by lifting compulsory super – if we are protecting them from even worse outcomes in retirement.”
However, low-income earners would lose the same amount in accumulated super as a middle-income earner, but would also receive less extra age pension to compensate. This could be offset by increasing rental support and the Newstart Allowance.
“Of course, some low-income Australians remain at risk of poverty in retirement – especially those who rent – but struggle even more before they retire,” Mr Coates said. “And boosting Rent Assistance would do far more than higher compulsory super to help these vulnerable Australians, and without reducing their take-home pay before they retire as higher compulsory super would.”
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