The age pension age is current 65½ following a rise from 65 is July 2017. It is set to increase further in stages to 67 by July 2023. If current government proposals are accepted, the age pension age will be 70 by 2035. This applies to both men and women. This has led to Australian’s asking some important questions:
- Can I work this long?
- Will my superannuation provide a comfortable, reliable lifestyle?
- What is the lump sum figures required for a comfortable retirement?
What is a comfortable retirement lifestyle?
Data from Deloitte, estimates the lump sum needed to produce a “modest income” in retirement is $340,000 for a man and $370,000 for a woman, [the latter due to an average longer life]. However, the lump sums for a “comfortable lifestyle” are much greater – $610,000 for men and $690,000 for women.
A “modest” lifestyle is defined by Association of Superannuation Funds of Australia [ASFA] as better than the age pension, but still only able to afford fairly basic activities.
A “comfortable” lifestyle enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities. They enjoy a good standard of living through the purchase of household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, domestic and, occasionally, international holiday travel.
Although these numbers may seem large, the modest lifestyle amounts equates to $450 per week for single retirees. The comfortable lifestyle is around $813 per week.
What do you need to do?
To achieve this level of comfort, Deloitte’s recommends the average Australian should contribute an extra 5.5 per cent to 7.5 per cent of their annual salary to superannuation. These figures are in addition to the existing 12 per cent superannuation guarantee charge.
Take a look at your super and see how it shapes up. How do you think ongoing changes to super will affect your retirement nest egg? How does a superannuation strategy stack up against a property investment portfolio?
