In the current economic climate, Millennials and Gen Z might feel like they’re unable to get ahead financially. But whilst the housing market and cost of living pressures seem daunting, there’s one area they may be sitting quite comfortably in compared to older generations: retirement.
Retirement may not exactly be what either group are thinking about right now, as it’s still a long way off. But there are benefits that Millennials and Gen Z have that older generations did not. The most important reason for this is because they are benefiting from compulsory superannuation payments.
Superannuation in its current form began in 1992. It seems like a long time ago, but it’s only 32 years. At the time the rate was only 3%, and increased gradually to 9% by 2002. After that, the next increase wasn’t until 2014, where it rose to 9.5%. It stayed at this rate until 2021, where it has been increasing incrementally, and reaches 12% in 2025.
Those approaching retirement age now, and even some of those who have already retired, did not have the benefit of getting superannuation, or a high amount of superannuation, for the entirety of their working lives. According to ABS data, the main source of income for retirees in 2022/2023 was the Age Pension. Only 33% of men and 21% of women had superannuation as their main income source.* Rewind ten years, and these two figures drop to 25% and 10%.**
Millennials, and generations afterwards, do have the advantage of having compulsory superannuation – and higher amounts – for their entire working lives. This allows more time for compound interest and investments to build a larger nest egg than would have been possible a few decades ago.
Additionally, other benefits have been introduced over the years that have been designed to help build super balances. For example, contribution splitting was introduced in 2006 and allows people to make contributions into their spouse’s super. Additionally, the government is expected to start paying superannuation on Paid Parental Leave from July 2025.
If you haven’t thought about your superannuation much in a while, or what kind of amount you could be looking at once you reach retirement age, visit your super fund’s website. Most funds have superannuation calculators that will give you an estimated projection of what your super balance will look like at retirement, and how your future years may be funded through a combination of superannuation and social security payments.
* ABS, Retirement and Retirement Intentions, Australia, 2022-2023
** ABS, Retirement and Retirement Intentions, Australia, 2012-2013
