Retirement is a touchy subject with many people, but unavoidable given the demographic fact of the burgeoning ranks of Australians heading into this phase of their lives. Australia’s is a much-vaunted system, but the reality is it will struggle to give every citizen an adequate retirement, because “adequate” means different things to different people.
That is the conundrum of the super system, Bryan Ashenden, head of financial literacy and advocacy at BT Financial Group told the recent The Australian/Sky News Business “Money Talks” panel: there is no “magic calculator” that tells you how much someone needs to have a really comfortable retirement — because retirement is a “highly individualised” scenario.
“Everybody’s situation is different,” Ashenden says. “It’s not just the amount of money you have in retirement, it’s how long you’re going to live, what your spending pattern is going to look like, what you actually want to do in retirement, how you invest your money, are we talking about a single person or a couple — so the equation that comes up with ‘this is how much you need’ is, unfortunately, going to be different for everybody.”
“The over-85s are the most rapidly growing cohort of the Australian population”
According to the benchmarks set by the Association of Superannuation Funds of Australia’s (ASFA’s) Retirement Standard, Australians need income of more than $25,000 a year in retirement to fund their expenses and a “modest to comfortable” lifestyle. For a “modest to comfortable” retirement lifestyle — considered by ASFA to be “better than the Age Pension, but still only able to afford fairly basic activities” — a single Australian will need $27,368 a year, while a couple needs $39,353.
For those wanting a “comfortable” lifestyle — which ASFA defines as one enabling “an older, healthy retiree to be involved in a broad range of leisure and recreational activities, and to have a good standard of living through the purchase of such things,” a single person will require income of $42,764 a year, while a couple needs $60,264.
But such projections inevitably involve generalisations — while individuals’ wants and needs are exactly that, individual.
By James Dunn
The Australian Business Review