July 16, 2014 is_admin

Will I have enough to retire comfortably?


It seems each week an article appears in one newspaper or other attempting to pull the rug from underneath the greying old folk who are thinking about retirement. The sentiment is always gloom and doom, and whilst some long standing rules have recently changed, there are common sense strategies which can be implemented to achieve a well-funded retirement. Ironically, as rules are changing these strategies remain tried and true.

One common sentiment is that Australians will be forced to work longer. For those born after 1957 the retirement age has already increased from 65 to 67 years of age. I think for many people this prospect is not very palatable; however Australia cannot afford to support the baby boomers and future generations who could spend 35 years or more in retirement.[1]  A couple aged 60 years today, have a 50% chance one of them will live past 90 years of age [2] and those born today could well live as long as 125 years.[3]  I think drastic measures are required sooner rather than later.

This then leads to how much income you need in retirement. The Association of Superannuation Funds of Australia (ASFA) estimates a couple will need an annual income of $33,120 to achieve a modest standard of living in retirement. The same couple will need an annual income of $57,195 to achieve a comfortable standard of living in retirement. To meet the level of comfortable income, the couple will need a lump sum of $744,000 if retiring at age 65, with an average life expectancy of 85.[4].

With the age pension currently providing a couple with an annual income of $32,416.80 there appears to be a definite shortfall if you rely solely on the aged pension.[5]   It would seem the notion “I’ve paid taxes all my life and will now live on the age pension” is a thing of the past. Baby boomers may suggest raising taxes as the answer; however I think Gen X and Gen Y, who are already working to an older retirement age, would not agree. So what is the answer?

There are definitely things you can do to take control of your retirement. Here are our tips:

  • Firstly, seek professional advice. If you don’t already have a Financial Planner, find one!
  • Establish current and anticipated future income needs. Doing a family budget is the best place to begin. Don’t forget to add any lump sum expenses such as an overseas holiday or purchase of a new motorcar.
  • Seek professional assistance to understand your tolerance to investment risk; make sure you fully understand the options available; and ensure you understand the advantages or disadvantages of each investment asset class. This is the only way you can make an informed decision about how to invest your savings to suit your individual needs.
  • Develop a well-researched and easy to follow plan and make time to regularly review your plan. Chasing returns from the previous year or following “the next best thing” is no guarantee for success. In fact, this regularly result in negative outcomes. Set in place a plan which works for you and stick to it.
  • Do something now – the sooner you start, the better the outcome.

By Nick Cooper, Senior Financial Planner

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. Whilst it is believed the information is accurate and reliable, this is not guaranteed in any way.

Please note: The advice in this article is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.

[1] The Australian Government Productivity Commission research paper “An Ageing Australia: Preparing for the Future” November 2013

[2] Australian Bureau of Statistics 2011

[3] Association of British Insurers

[4] ASIC Moneysmart – https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-contributions/how-much-is-enough#how

[5] Rates effective from September 2013 and include the base rate, the age supplement and clean energy supplement.


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