Start super discussions from 20s
The financial advice industry must educate clients in their 20s and 30s in the workforce that contributing to their superannuation over and above the minimum is more critical than asset allocation, according to Australian Unity.
Senior investment specialist, Jody Fitzgerald, said current contribution rates to superannuation is simply inadequate and has to be increased to ease the burden on governments of supplying the pension to individuals.
"If you go back to when superannuation was originally proposed, Paul Keating was originally an advocate for super for 15 per cent," Fitzgerald said.
"Individuals [need to] accept the fact that they need to start saving money through the superannuation system in order to make sure that they have the retirement they're after."
Fitzgerald also said the current baby boomer generation who are heading to retirement are not equipped to face the longevity risk because up until recently, the super industry focused on the accumulation phase until age 65.
"Not a lot of thought was given to the fact that after 65, you can live for another 20 or 30 years, which is a long time to live off your superannuation. So I think the current generation of baby boomers are not in a great place from that," she said.
Starting discussions with clients in their 20s or 30s might be a way to mitigate the hurdles facing the current baby boomer generation, because it might be too late to build an adequate reserve of assets if clients delay discussions until their 40s, she added.
AUTHOR
Malavika Santhebennur
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