How much do you really need?
Recent research shows that the annual value of Age Pensions paid to those entitled to maximum benefits, amounts to less than half of what a retired single needs to live a comfortable life.
The Association of Superannuation Funds of Australia (ASFA), found that to have a comfortable lifestyle, retired singles who live in their own home need to spend over $43,000 a year and couples over $60,000.
Keeping in mind that the maximum annual Age Pension for singles amounts to just over $23,000 (including the Pension and Energy Supplements) and just over $35,000 for couples, there is a huge shortfall between aspiration and reality, for “comfortable” living.
The news isn’t any better for those single age pensioners around 65YO who are simply looking for a modest lifestyle compared to comfortable.
The ASFA Retirement Standard also provides a breakdown by state and territory of how much is needed to support a chosen lifestyle in these areas.
For up to date details, visit the ASFA – http://www.superannuation.asn.au/ click Resources in the top menu, and click Retirement Standard in the left menu
or this link –
Also look at www.superguru.com.au for tools calculators and information.
Will your money last?
As Australians are now on average living longer, superannuation needs to stretch even further to cover living expenses. Will your money last as long as you live?
You have a 50/50 chance of living as long as your life expectancy and in some cases, you may even exceed it. So how do you make sure you have enough money stashed away to last a lifetime?
The Australian Securities and Investment Commission (ASIC) has a useful guide that can assist you to estimate how long you will live, how much money you may need and how you can maximize your retirement planning to achieve your target.
Could your life expectancy be even longer?
Over the last century, life expectancies have improved. For example, based on the 2000-02 Life Tables, men at age 65 could expect to live five years longer than compared with the 1960-62 Life Tables. You should allow for the possibility that life expectancies will continue to improve. ASIC asked the Australian Government Actuary to come up with some estimates that take into account possible improvements in mortality rates. The figures shown in Table 1 are based on an assumption that mortality rates will continue to improve from 2000-02 at the same rate they improved over the preceding 25 years. Remember, on average, it is more likely that people at these ages will live beyond the life expectancies shown (if mortality rates behave in line with these assumptions).
Note: These estimates take into account the falls in mortality rates that might be expected to have occurred already, together with further improvements that could be experienced over someone’s lifetime.
What are your chances of a ripe old age?
Of course, it’s all very well knowing that at typical retirement ages you have a better than 50/50 chance of living beyond your life expectancy, but you probably want to know what are the chances of living past that. For example, at what age is there a 10% chance that you’re still alive? You may be surprised by the figures in Table 2.
Note: These are estimates, based on the same assumptions as Table 1. Particular assumptions about future mortality rates may not be borne out in practice, and should not be taken to be forecasts. So don’t be too quick to write off planning for your 100th birthday. Are you likely to be living alone without any children or other close relatives to look after you in your old age? You might want to have some extra money to pay for help at home or a place in your preferred aged care home. Just to be on the safe side, you might want to plan for the 10% chance that you’ll live past 100. You may want to consider other probabilities or survival in Table 3. (We do emphasise that these are estimates, not certainties.)
Note: These are estimates, based on the same assumptions as Table 1. Particular assumptions about future mortality rates may not be borne out in practice, and should not be taken to be forecasts.
To find out if your money is likely to last as long as you do, visit www.moneysmart.gov.au
What does this mean for your retirement plans?
ASIC hopes you’ve now taken on a new lease on life, and are looking forward to living longer and healthier. If you’re concerned about how you’ll support yourself, review your retirement plans, and consider these possibilities:
- Talk with your financial advisor and tax agent
- A plan of action is better than NO action:
- Strategy – to become a controller of your wealth;
- Structure – maybe a Self-Managed Super fund (SMSF) is the answer; and
- Support – a service to handle all the set up and compliance such as SuperBenefit.
BONUS tool – Try this simple one-page free tool at –
If you have any questions, please call or email as we would be happy to assist you with further information.
For a FREE no obligation discussion of the options for you, call us to book a time to meet.