Comment: Report paints a false view of retirement ‘heaven’

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More than enough? You’re kidding me.

Don’t you love it when the big end of town starts pontificating on how much (or in this case, how little) you need in retirement? For years we’ve suffered the ridiculous assumption by the Association of Superannuation Funds of Australia (ASFA) that unless you have between $1 million and $1.6 million in super you may as well throw yourself off the cliff now. But the debate just got worse, with the latest Grattan Institute report – erroneously and provocatively titled Money in retirement: More than enough.

The main assertions in this report, as covered in our news item, “Retirees living the dream”, are that most retirees are more than financially comfortable, to the point where they save money. So, there is no need to raise the Superannuation Guarantee Contribution (SGC) from 9.5 per cent to 12 per cent as currently legislated.


Where to start with the assumptions in this report?

The first point is that reports such as this do a lot of damage. By quoting averages, rather than median statistics, a false view of retirement heaven is portrayed. And this leads to lazy, generalist headlines in the media, such as today’s Herald Sun headline, “Easy living for retired”.

It is high time the so-called economic experts spoke to some real retirees, as YourLifeChoices does on a frequent basis. With more that 5000 responses to our frequent surveys, we know that financial stress in retirement is very real, with 81 per cent of our members not sure if their money will last as long as they will.

According to the Australian Institute of Superannuation Trustees (AIST), the median super balance for those about to retire is $95,000. Less than five out of every 1000 (i.e. less than 0.5 per cent), excluding those with self-managed super funds (SMSFs), will have $1 million or more.

For this reason, YourLifeChoices publishes the real cost of living in retirement – the Retirement Affordability Index on a quarterly basis, categorised by the six retirement tribes. Those who are self-funded (Affluents) are spending about $75,000 if they are couples or $43,000 if singles. The other 70 per cent are comprised of the Constrained (homeowners on an Age Pension) or Cash-Strapped (renters on an Age Pension). It is this 70 per cent who report to us that living on $43,000 (Constrained Couple), $24,000 (Constrained Single), $36,000 (Cash-Strapped Couple) or $23,000 (Cash-Strapped Single) is difficult, with health and utility costs being a major concern.

The real problem with the Grattan Institute report is not only its lack of awareness of the real costs of living in retirement, but it also doesn’t project what is coming. It notes the financial stress on those who rent (currently about 16 per cent of retirees), but seems to pay little attention to the growing number of Australians entering retirement with unsustainably high mortgages – and little hope of covering the repayments on reduced retirement income.

And while the report notes that home ownership in retirement will decrease to 57 per cent by 2056, it does not do the basic sums to conclude that if retiree renters are financially stressed, when the number of renters swells from 16 per cent today to 43 per cent by 2056, then the level of serious financial suffering will affect almost half the population. Removing increases to the Super Guarantee would be the worst response to this coming crisis – not smart policy at all.

The report also states that increased health and aged care costs are “largely borne by the taxpayer”. This is fundamentally untrue. With the introduction of Consumer Directed Care legislation in recent years, aged-care costs are now well and truly being shifted to the individual.

Current Federal Government committees are working on ways to make individuals understand this and plan for their own aged-care costs. With many age-care facility deposits between $400,000 and $700,000, older Australians will need to save hard or own a home (decreasing likelihood, see above) to even get near such costs.

Further, maintaining health insurance remains one of the key concerns for retirees, with many going without basics in order to hang on to this increasingly expensive need.

The recommendation by the Grattan Institute that rental assistance be increased by 40 per cent is noble – given the most recent increase, on September 20, was $1 per fortnight – yes, 50 cents a week. Good luck with that one!

The report’s assumptions are incorrect, it overlooks the real costs of living in retirement and it recommends removing one of the few ways of increasing retirement income (the SGC increase), which will help future, less well-off Australians have a passingly bearable retirement.

However, the report does serve one very good purpose. It has initiated debate on a topic that badly needs ventilating. And it waves the flag that we need to review how people save for retirement and what help they need.

Nothing short of a root and branch review of our retirement income system will get the settings right. YourLifeChoices has been calling for such a review for years – and will continue to do so.


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Written by Kaye Fallick


Total Comments: 48
  1. 0

    Individual circumstances need to be taken into account. People who become unemployed in their fifties will not be in a good position on retirement. Another group is people who suffer with poor health. Life affects people in different ways. Not everyone is on a good income throughout their life. Raising a family on low incomes causes people to seize every dollar to educate and feed their children. There was no top up from the government in the sixties, seventies and eighties. People had to manage on the equivalent of today’s amount of $60,000 to rear big families. So, no wonder they have no big super or investments. It is not okay for people to judge who do not fit into any of these groups. People should be proud to access the pension not ashamed as a few on here try to label what they consider to be less worthy people than themselves. So, treat each person as an individual and help them to the extent they need.

    • 0

      Great commentary. Centrelink and the pension is a terrible nightmare of hoop jumping , and rules for what you can and can’t get, or do, that it is a disgrace to the people of this country that even one pensioner is struggling.
      In fact its outrageous, when you retire, unless you are one of a minority with plenty of money, that you have to fill the form and obey the unfair rulings, and take the pittance that is offered for your lifetimes work, and watch as welfare is handed out to people who in some cases should not be even living in our country.
      Call that what you like?
      But I get infuriated with the refugee and over loaded immigration set up. And the party that promises some big changes will get the votes. Don’t know which that will be,but God we need it!
      Only how do you trust them, strangely a Labor person all my life, I would trust Morrison way before Bill Shorten, that fellow cannot be the PM.

    • 0

      But when it comes to SFRs, Paddington, you ASSUME they are all in the same circumstances and support destroying their lifestyle. That’s rather hypocritical.

    • 0

      OGR, point to the above words that denigrate SFRs?!
      I am pretty sure they are not all he same either. Comments on here suggest that some are very well off whilst others are probably balancing the budget by making choices.
      No matter which tribe you are a member of it does not hurt to be civil.

  2. 0

    Pre retirement income more than $100000, post retirement income (still working 2+ days per week) less than $40000 – where does this equate to 75% of pre retirement income? These reports from the money end of town need to be read with a VERY large grain of salt, and/or much more rigorous fact checking (not just with their mates)

  3. 0

    The big problem with SFR is that they do not receive any other pensioner benifits such as medical and hospital costs. Which can be significant for those who have ongoing illness and operations. Pass on these benifits to all retirees and we will all be better off. No wonder the ALP continue to raise the medicare scare it is real for SFR’s.

  4. 0

    me thinks this is “fake” media…

  5. 0

    I consider myself and my wife lucky, we own our home , but we are not outlandish spenders because we can’t be. In our world of retirement strict budgeting is the only way.
    I am continually baffled by retired people off travelling over seas, for some it is a regular occurrence.
    We struggle to go interstate, and living costs are high.
    If you don’t own your home by retirement you are in trouble from the word go.
    I suspect lots of retirees borrow money to travel, and I don’t think that the assumptions are wrong I KNOW THEY ARE WRONG. And they are extremely dangerous because of the fact that they give ideas to politicians who really in the main make the decisions and are up high in the party room to get ministerial jobs , they also live in another world to us, and have not a clue!
    I have to say I get a bit tired of seeing Julie Bishop all dressed up at some up market “do” for millionaires, its not a fashion or success showing off, its a statement of look at me don’t you wish?
    These people do not live in the real world and the Grattan people should perhaps sack their investigators and hire some who actually look properly, because I’m ok, thats all,
    but some are in struggle street after all their lives breaking their backs to earn a living. And politicians wouldn’t know if their backsides were on fire!

    • 0

      For a start, John, they don’t allow anyone without higher-level university degrees to express any opinion on anything, so they are working on flawed data supplied by the privileged. Nobody on struggle street is permitted a voice, according to their rules. Nor anybody who struggled but achieved moderate comfort and can relate common sense that would help improve things for everyone.

  6. 0

    Closing down the Grattan Institute would be a welcome reform. They are full of BS!

    One glaring flaw in their crap – apart from their wild assumption that almost all retirees are wealthy – is that they pay no attention to how long funds must last. (Neither does the government and neither do fools like OG). $800,000 may be a substantial super balance if you are 90, but for a couple who have to make it last 30 years – without pension, concessions, and potentially now without even the small franking credit tax refund they need to achieve an income even equal to the OAP, it’s not much at all. Add health issues and personal care costs, and keeping up to $700,000 for aged care is pretty much an impossibility. The house? Well, what does the other half of the couple live in when the older one goes into care, and how does the second partner fund THEIR aged care?

    I keep seeing pensioners saying SFRs should live on their savings. In what universe is it fair to suggest someone who spent much more freely should get $1 million+ from the taxpayer purse to fund retirement, while the person who struggled and went without to save $800,000 gets NOTHING? If you are GENUINELY needy through no fault of your own, I have no issue with my kids contributing to your support, but MOST pensioners had it far easier than I did, but just didn’t choose to go without the luxuries. Same with rent assistance really. Most of my generation COULD have owned a home, if they had made the effort. It sure wasn’t easy for me. Nowhere near as easy as it is for most of the young who are whinging, despite their first home buyer grants, record low interest rates, subsidised child care, and a host of other benefits I never dreamed about.

    Grattan Institute says some retirees have 90% of their working income. So? Obviously they worked hard and planned well to achieve that. And if their working income wasn’t particularly healthy, they may well NEED 90% of it – or more. Especially if they have health or personal care issues that impose heavy costs, or need home help.

    As for inheritances… gee, golly! How awful that someone who worked their guts out for 50 years, paid tax, raised children who pay tax, contributed to charity and the community, AND went without luxuries to save should actually be able to leave a little for their offspring and make life better for their grandchildren! It’s okay for a spendthrift to be given over $1 million of taxpayer money, but not for a saver to be able to leave a needy child or grandchild a little of the money they worked so incredibly hard to save for that purpose. What a disgustingly selfish and unfair society we live in. And no wonder the budget is in such a mess, when all idiots in charge can do is provide more and more incentives for people to stop saving and contributing and plan to be among what is now the pensioner elite.

    BTW. Despite a plethora of evidence that over 80% of those he’s attacking have incomes less than $37,000 per annum, and it doesn’t touch ANYONE who is wealthy (unless they are a massive tax cheat) Bowen has CONFIRMED ABSOLUTELY he has NO INTENTION OF REVIEWING IS DISGUSTINGLY UNFAIR FRANKING CREDIT POLICY. He’s quite happy to wipe out the lifestyle of self-funded retirees and push more onto the pension. And if any pensioner supports that, they are a short-sighted, selfish, blithering idiot. What do think happens when the pension blows out to be totally unaffordable, fools?

  7. 0

    Report also said houses over $500,000 should be included in the assets test. There would be a lot more people accessing rent assistance! Those soon to retire would sell up and spend up, especially if the allowance were increased by 40%.

  8. 0

    Grattan Institute is comprised of a bunch of greedy, very highly paid, VERY HIGHLY EDUCATED (formally) IDIOTS with no common sense, consumed by hate for older Australians, insanely jealous of anyone who they think might have more than them, and determined to grind the average Australian into poverty so the elite can have it all. They do not allow anyone to express an opinion unless they have extensive post graduate university degrees and live in academia. In other words, they have no clue about life in the real world. Should be shut down.
    Close th

  9. 0

    I agree with the Grattan Institute report it is closer to the mark than even Your Life Choices Surveys. Nobody tells the real truth in survey but gives the information they think the survey wants to hear. When income is involved people tend to disclose only a part of their real income and increase their expenses above what they really are.

  10. 0

    I too tend to agree with Grattan
    Most of my retired friends live comfortably and can’t spend all their retirement income .
    We are all better off financially from the day we retired because unspent income is reinvested resulting in even more income the following year

    • 0

      Obviously you only mix with folk who had the same generous opportunities and high income you did, Lothario. You need to get out more and meet some REAL people.

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