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Scary stats show super exhausted after two years in retirement

Posted by Paul Wilson

There’s so much talk out there at the moment about the budget, retirement and superannuation, but should we actually be worried about the Reserve Bank governor’s latest comments?

The RBA's Glenn Stevens recently warned soon-to-be retirees that they will face tough times ahead.

He also says that as a result, they will need to take more risks with their lifesavings and investments to fund their retirement than those in the past, in order to generate an adequate future income.

The alarming thing is that retirement should be a time of scaling back risk and adopting more conservative approaches to finance and investment.

Soon-to-be retirees, in a perfect world, should have accumulated a substantial amount of superannuation, own their own home and perhaps an investment property, and hopefully have a nice sum of savings.

But this is unfortunately far from the reality.

The latest ABS Survey of Income and Housing showed that the average value of superannuation for Australian households was $132,000. It’s worth mentioning that this doesn’t paint an accurate (or as positive) picture, as it’s an average and not a median calculation.

This means that there are people out there with much less to their name who will soon retire and come to realise that they just don’t have enough. But how much is enough? And what determines a modest or comfortable lifestyle?

According to The Association of Superannuation Funds of Australia (ASFA) Retirement Standard, a modest retirement lifestyle is better than the Age Pension, but still only able to afford fairly basic activities.

On the other hand, a comfortable retirement lifestyle would enable an older, healthy retiree to have a good standard of living through the purchase of things such as household goods, private health insurance, a reasonable car, good clothes, electronics and domestic and occasionally international holiday travel.

The most recent national figures released for the ASFA Retirement Standard show that, in general, a couple looking to achieve a comfortable retirement at 65 needs to spend $56,444 a year, while those seeking a modest retirement lifestyle need to spend $33,799 a year.

With some simple math, if you and your spouse were to retire on the average super balance of $132,000 mentioned above, and with the hopes of leading a comfortable retirement lifestyle, your super would only last you just over two years.

For those now thinking they would only be able to fund a modest retirement lifestyle, your super would still only last you just under four years.

Sure, you could fall back on the Age Pension, but what kind of a life would that be? Far from the retirees driving off into the sunset.

My point here is that we need to start taking responsibility for our own retirement. It’s never too late to start saving and if you’re young enough, I urge you to invest in property to create long lasting wealth for your future. There’s no other more stable and rewarding asset class that can provide the benefits it does.

If you’re unsure of how to best prepare your nest egg, give me a call on 1800 890 600 and we can talk about your retirement plans.

If you’re curious to see exactly what spending is included in the ASFA budget, click here to see a detailed breakdown. And if you want to calculate how much you will need for your own retirement, click here.

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