The Australian super system is the fourth largest in the world and provides Australians with the opportunity to save for and provide for their retirement years. Whilst this system will likely serve Gen Ys and younger generations well, the reality is many Australians today are approaching retirement with unhealthy super balances.
The number of Australians over the age of 65 will increase by 75% over the next 20 years. There is no doubt that Australians are living longer. We are spending longer in retirement and thus need considerably more money to provide for retirement. It’s interesting to note that since World War II, the average time in retirement has increased by almost 50% as a result of medical advances.
How much will I need?
The chief role of superannuation is to provide Australians with an adequate and comfortable standard of living in retirement. However, we know that most retiring Australians do not have nearly enough super and at present 81% are still forced to, at least partially rely on the Government aged pension to supplement their income.
The ASFA (The Association of Superannuation Funds of Australia), Retirement Standard, benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in retirement years. It is updated quarterly to reflect inflation and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.
Here is a summary of the recent ASFA figures for various households and living standards:
– For a modest lifestyle, a single will need $23,662 to spend annually
– For a modest lifestyle, a couple will need $34,051 to spend annually
– For a comfortable lifestyle, a single will need $42,861 to spend annually
– For a comfortable lifestyle, a couple will need $58,784 to spend annually
These amounts assume you own your own home, with no remaining debt. If you would like to view the breakdown, please visit the ASFA website
Of course your idea of “modest” or “comfortable” may be quite different.
So will you have enough money to provide the level of income you require for a long and happy retirement?
The good news is that there are plenty of tax effective options for most people who are still working to boost their retirement savings. But if you are over 40 and haven’t put strategies in place yet, then it’s probably a great time to start.
If you would like to discuss retirement planning in relation to your own situation, please send us a message.