Whilst this isn’t meant to be relied on as a person’s main source of income, around 50% of retirees currently do . One of the reasons why this might be the case, is a lack of planning ahead when it comes to our retirement years.
In truth, the Age Pension should be viewed as one aspect of your overall retirement plan, not its entirety. A recent survey by the ASX revealed that while 50% of people surveyed believed that saving for a holiday was their number one financial goal, only 12% said that their goal was to plan for retirement .
Why aren’t we planning properly for our golden years?
There are a lot of reasons why we haven’t always planned ahead for our retirement. One of the bigger ones is that superannuation has only been compulsory since 1992, so a large proportion of the current retiree population may not have had super for much, if any, of their working lives.
Additionally, superannuation may not be enough to support a person in retirement alone. According to ASFA the average man retires with $270,710 in their super, whilst the average woman retires with just $157,050 . ASFA also says that the lump sum needed to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single.
Thirdly, there is a proportion of retirees in Australia who have been forced into retirement early due to illness or injury, where they are often in limbo until they reach Age Pension age. The report on the Retirement income review revealed that around 28% of retirees are in this position . The report also suggests that those who don’t own their own home and are paying rent in retirement are also disadvantaged. This can be either due to higher financial stress or a lower pension (the principal family home isn’t included in the means test, but savings and assets are) .
What can you do?
It’s not a bad thing to include the Age Pension in your retirement plan. But we think it should really only make up one element of your plan, such as a backup source of income. The best thing you can do is build a strategy to ensure your money works hard for you in retirement, including making the most of social security benefits.
Get help from the experts
Retirement planning is a complex area, and everyone’s situation is different. It’s a good idea to seek out the advice of a financial planner, who can help you determine when you want to retire, how you want to spend your retirement, so that you can figure out what you need to do financially in order to get there. This could include things like making personal contributions to boost your super balance, building an emergency fund or nest egg, or ensuring you have adequate income and TPD insurance.
TelstraSuper Financial Planning can provide you with advice over the phone on your retirement planning options; give them a call on 1300 033 166 to discuss your advice needs. Alternatively, you can request a callback using our online form.
So whether you want to spend your golden years travelling around in a caravan, or just spend more time with the grand-kids, you’re more likely to achieve your retirement dreams if you start planning now!
For more hints and tips to help you plan for retirement check out our online modules.
3. ASFA, Superannuation account balances by age and gender, ASFA Retirement Standard, September 2020