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The Australian Super system is the fourth largest in the world and provides Australians with the opportunity to save for and provide for their retirement years. Whilst this system will likely serve Gen Ys and younger generations well, the reality is many Australians today are approaching retirement with unhealthy Super balances. This is attributed to increasing life spans, the effects of the GFC on Super balances and the fact that the Superannuation guarantee only started in 1992 and is leaving older workers underfunded.
The number of Australians over the age of 65 will increase by 75% over the next 20 years (from 3.3 million – 2012 to 5.8 million – 2032). There is no doubt that Australians are living longer. We are spending longer in retirement and thus need considerably more money to provide for retirement. It’s interesting to note that since World War II, the average time in retirement has increased by almost 50% as a result of medical advances.
The chief role of Superannuation is to provide Australians with an adequate and comfortable standard of living in retirement. However, we know that most retiring Australians do not have nearly enough Super and at present 81% are still forced to, at least partially rely on the Government aged pension to supplement their income.
The ASFA (The Association of Superannuation Funds of Australia), Retirement Standard, benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in retirement years. It is updated quarterly to reflect inflation and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.
Here is a summary of the latest ASFA figures for various households and living standards:
If you would like to view the breakdown, please click here / visit the ASFA website
The best way to determine how much money you will require for retirement is to speak with a Financial Adviser. Together you can establish your lifestyle goals, housing requirements, number of years you are planning for, contingency planning etc. This process will allow you to understand how much money you will require per year (based on your chosen lifestyle). You can then calculate a “total figure” – which will provide an idea of how much money you would require upon retirement.
There are many variables to consider, so start thinking and discussing your retirement goals sooner rather than later. A little planning can go a long way and there are tax effective strategies that may be appropriate for you. If you are ready to begin your pre-retirement planning, or would like to alter your retirement plan, speak to a Financial Adviser who can help you understand the bigger picture of retirement and ultimately how much money you will require. Source: Capstone Financial Planning.