If you’re investing like most people, defaulting to balanced funds and third-party providers, your retirement savings are likely not enough to enjoy a self-sufficient, 25-to-30-year retirement. Even with steady super contributions and decent investment returns, most people face a serious shortfall in retirement. It’s a gap that often doesn’t become clear until it’s too late.
As of 2024, there were 4.2 million retirees in Australia, many of whom are already experiencing the consequences of inadequate planning and low-return investing.
But there is good news! With a few smart changes to how you invest, you can take control of your financial future and give yourself a much better chance at a comfortable, stress-free retirement plan in Australia.
Let’s look closely at why the current system falls short and what you can do about it.
The Retirement Gap: A Growing Crisis
Investing the “default” way almost guarantees what we call a Retirement Gap, meaning you won’t maintain your current lifestyle once you stop working.
Research by the National Institutes of Health (NIH) shows that 42.4% of retirees did not realize their pre-retirement expectations.
But it doesn’t have to be that way. The earlier you act, the more compounding works in your favour, especially if you’re aiming to build enough wealth to stay under the transfer balance cap and still enjoy a comfortable retirement.
Why The Current Retirement Model Doesn’t Work
Four key levers determine the size of your retirement savings nest egg:
1. How long have you saved (Time)
2. Your salary and how it grows
3. Your savings rate (contributions)
4. Your investment return rate
You’d think today’s system would help you optimize these. Instead, it often does the opposite.
The Case Study: Joe’s Retirement Projection
Joe starts work at age 25 in Australia. He earns a lump sum of $50,000, which grows at 2.5% annually (Input #2). His employer contributes 11% (Input #3) into a Balanced Fund. Australia’s super contribution rate will increase to 12% in 2025, but that still might not cut it.
It’s also worth noting that super contributions are subject to the concessional contributions cap, which is $27,500 per year as of 2024–25.
Return Rate? Balanced Funds have delivered an average of 6.1% p.a. over the past 10 years, before fees. After fees (0.5–1.5 %+), real returns drop below 5.5% (Input #4).
Let’s use a generous 7.5% p.a. return in our model and assume Joe saves for 40 years (Input #1). That leaves him with a final nest egg of $1. 29 million.
Sounds like a lot?
Here’s why it’s not enough. Especially if Joe hopes to avoid relying on the Age Pension from the Australian government, which provides only a modest income and is means-tested.
How much income does the age pension provide?
As of March 2025, the age pension payment for singles is $1,149.00 per fortnight.
ASFA’s 2025 standard says a comfortable retirement costs $595,000 for a single person and $690,000 for a couple.
But these figures assume retirement today. If you’re 25 or 30 now, you’re not retiring until 2065 or beyond. And with 2.5% inflation per year, the future value of that lump sum will be significantly higher.
Let’s compute it using the formula: Future Value = Present Value x (1 + Inflation Rate) ^ Years
= PV x (1.025)^40
Single Person
- %595,000 x (1.025) ^ 40
- ~ $595,000 x 2.685
- = $1,597.575
Couple
- $690,000 × (1.025)^40
- ~ $690,000 × 2.685
- = $1,852,650
Now, let’s compare it to Joe’s nest egg of ($1.29M)
- Single Retirement Gap: $1,597,575 (required) – $1,290,882 (Joe’s) = $305,693 short
- Couple Retirement Gap: $1,853,064 (required) – $1,290,882 = $562,182 short per person
That’s a total gap of $1.12 million for the couple
So, to retire comfortably, your money should be at least $1.6-$1.85 million in today’s dollars. If you’re relying on the standard super setup, you’re not on track. You’ll need to rethink your strategy, or risk running out of money far sooner than expected.
Your 4 Options to Bridge The Gap
There are only four ways to close this gap and keep up with the living costs before you retire. Let’s walk through them and what each one demands from you.
1. Work Longer (45+ years)
Retire at 72 instead of 65, and your nest egg savings could grow enough to close the gap.
✅ Simple
❌ Risky if health issues arise
❌ Not desirable for most, especially when you can already access your super from your preservation age.
2. Earn Much More
You’d need an average of 6.5 %+ salary growth annually to make this work while keeping the other factors, such as age pension, constant.
✅ Doable if you climb the corporate ladder or build a business
❌ Unpredictable, especially mid-career
❌ Requires upskilling and career risks
3. Save More
Instead of 11–12%, aim to save 16–17% of your gross income every year (factoring in Australia’s 15% super contribution tax).
✅ The most direct fix
❌ Requires financial discipline
❌ Difficult with rising living costs
4. Earn Better Returns (My Preferred Strategy)
If you can boost your annualized returns to 9.7%, you could bridge the Retirement Gap without saving more, working longer, or earning significantly more.
✅ You don’t need to earn or save more
✅ More achievable if you control your investing
❌ Requires education, effort, and a proven strategy
Want Better Returns? Take Control of Your Investments
The standard Balanced Funds are loaded with fees and diversified to a fault. But with the right system, one with a verified edge, you can aim for stronger long-term returns.
Whether it’s through smart ETFs, direct share investing, or a rule-based system like ours, the key is to stop handing over control to high-fee managers. Services Australia may support retirees, but depending solely on government help often means compromising your lifestyle.
The industry benefits from your lack of awareness. If you stay passive, they win, not you.
And when your nest egg savings fall short, you may be left relying on the age pension, but it won’t fund the lifestyle you worked decades for.
Choose the Challenge That Fits You Best
Let’s recap using the table below:
| Option | What It Requires | Gap Coverage |
| Work longer | 5-7 extra working years | ✅ |
| Earn more | ~6.5 %+ salary growth yearly | ✅ |
| Save more | 16-17% contribution rate | ✅ |
| Earn higher returns | 9.7% long-term return rate | ✅✅✅ |
Final Thoughts: Don’t Wait!
Retirement doesn’t care whether you’re ready. If you want to avoid relying on the Australian government support, age pension, or your children, you need to act before retirement sneaks up on you.
If you’re ready to explore a better Rule of Returns, we’re here to help and provide you with professional advice.
📞 Call us: (+61) 03 9585 0300 | Aus: 1300 STOCKS
📧 Email: info@sharewealthsystems.com.au
To your future and your freedom!
Frequently Asked Questions
1. Is my super withdrawal tax-free after retirement?
Yes, for most Australians aged 60 and over, superannuation withdrawals are tax free if taken from a taxed fund. This applies to both lump sums and income stream payments.
2. How do I stay up to date with retirement changes in Australia?
The best way to stay up to date is by regularly checking the Services Australia website, which provides the latest news on pensions, eligibility, and payment thresholds.
3. What is the income test for the Age Pension?
The income test is used to determine how much Age Pension you can receive. It assesses your earnings from work, investments, and super, and may reduce your pension amount if you exceed certain thresholds.
4. Why is it important to review my financial situation before retiring?
Reviewing your financial situation helps you identify gaps in savings, understand your eligibility for government benefits, and avoid surprises. It also helps ensure you can retire comfortably and confidently.
5. Should I create an estate plan before I retire?
Absolutely. An estate plan ensures your assets are distributed according to your wishes. It typically includes a will, power of attorney, and superannuation beneficiary nominations.
6. Where can I find reliable retirement planning resources?
Visit the Services Australia website for trusted tools, eligibility calculators, and detailed guides on retirement income streams, Age Pension rules, and more.
