.... to provide a satisfactory standard of living in retirement.

It seems, however, that many individuals are using lump-sum super payouts upon retirement as a means to achieve one of their goals, a debt-free retirement.

Superannuation research, commissioned by accounting professional body CPA Australia, documents how debt accumulated before retirement is eating into Australia's retirement savings.

Author of the research Professor Simon Kelly, principal of KELLYresearch and an adjunct professor at the University of Canberra, examines the impact of pre-retirement debt on the effectiveness of compulsory superannuation since its introduction 21 years ago.

His findings send a telling message about the importance of careful debt control in the countdown to retirement.

"The growth in superannuation [since the introduction of the superannuation guarantee scheme] has been matched by an equal amount of personal debt being taken by households," Kelly writes.

Kelly notes an interesting facet of human behaviour. "The knowledge that households have a [superannuation] nest egg coming in retirement appears to have made people more comfortable with debt; and the annual superannuation statements along with rising house prices and household incomes have made people feel wealthier."

nd, in turn, this "wealth effect" is not only encouraging individuals to borrow more but is encouraging them to expect a higher standard of living in retirement.

The superannuation nest egg being built from superannuation guarantee contributions is not keeping pace with the raised expectations and the need to service debt in retirement," Kelly emphasises.

ave you earmarked your super savings to provide an improved standard of living in retirement or as a means to repay debt upon retirement? The answer could have a big impact on your future.

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
7th November 2013