Page 6 - How Australia Retires
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05 Vanguard | How Australia Retires
2 in 5 Table 1: Estimated impact of career break on superannuation balance
at retirement
Age at which the break starts
working age Australians Break Length (years) 25 35 45
expect to take extended 1 $10,000 $11,500 $ 9,500
break from work 2 $19,900 $22,600 $18,700
Notes: These are highly stylised estimates for the purpose of illustration only
Disrupting the traditional path and represent the estimated impact, in today’s dollars, on an individual’s
superannuation balance as at age 67 as a result of foregone Super
to retirement, many working-age Guarantee (SG) contributions during a career break starting at a particular
Australians expect to take some age. The figures are based an assumed SG rate of 10.5% (being the current
form of extended break from work SG rate, noting also that legislation has specified that this rate will increase
in the time between their twenties in future) and adjusted for CPI (assumed at 2.5%) and real wage growth
to fifties. (assumed at 1.5%), and rounded to the nearest $100. For the purposes
of this illustration it has also been assumed that SG contributions made
at age x are invested when the individual turns age (x+1), and that the
While undertaking full-time foregone contributions would have achieved a consistent annual earnings
work is important for working- rate equal to CPI plus 4% net of fees, costs, taxes and inflation. Actual
age Australians, expectations performance of superannuation products may differ. The estimates have
about what this might look like been determined based on the following assumed annual salaries which
reflect median gross wage data reported in the Australian Bureau of
differ significantly from those of Statistics’ Census 2021:
older generations. Working-age
Australians envision their careers • Wage at age 25: $41,500
to be punctuated with further • Wage at age 35: $60,000
study, parental leave, and career • Wage at age 45: $63,000
breaks; pursuits perhaps less likely The above estimates of the impact of foregone SG contributions are
to have featured in the working life not general or personal advice. They do not take into account the actual
of older Australians. situation, financial objective or needs of any particular person and are
not intended to be relied on for the purpose of making a decision about a
Of working-age Australians, career financial product. Consider obtaining advice from an Australian financial
services licensee before making any financial decisions.
breaks are more likely to be taken
by those on higher salaries who
have a retirement plan in place and
possess higher confidence in funding
their desired lifestyle in retirement.
This next generation of retirees
will need to factor in the financial
cost of extended career breaks,
particularly the impact that time
away from full-time work can have
on superannuation balances and
long-term retirement savings.
