$1 million not enough

Staggeringly, $1 million will not be enough to retire on in the very near future

$1 million not enough

If given the opportunity to retire with a million dollar superannuation balance you would probably be more than happy, but all too soon that simply won’t be enough.

It is anticipated that those aged 30 currently earning a salary of $60,000 will accrue a super balance of $1.1 million by 2024 but, staggeringly, this won’t be enough to afford a comfortable retirement. Men will need to have a balance of $1.58 million and women $1.76 million to live the life to which they are accustomed. As the Association of Superannuation Funds of Australia (ASFA) suggests that $860,000 is currently the magic figure which enables retirees to live a comfortable life, including eating out and holidays, the amount required in 35 years time will need to be double.

According to its sixth biennial report into superannuation, top accounting firm Deloitte warns that the Coalition Government’s decision to defer for two years the increase in the Superannuation Guarantee, from nine to 12 per cent, will cost retirees about $80 billion in lost superannuation income. It also suggests that it is necessary to increase the cap of $25,000 on concessional superannuation contributions to allow workers to top up their super balance and fund their retirement.

For those planning to retire in 2023, just 15 years away, over half are expected to live until 86 years of age. That’s 19 years after the retirement age of 67, as it will be by then. Deloitte partner Wayne Walker says the superannuation system needs an overhaul, or people will be working to 68 or 70 just to make ends meet. "The concern is that current policy settings, including caps and drawdowns, and the Superannuation Guarantee (9 per cent to 12 per cent) increase, will not deliver the lifestyle that the majority of those retiring in the next 20 years are seeking," he said.

"The reality is that many Australians will need to work longer and, where possible, contribute more."

It is also necessary to encourage people to make more provisions for their retirement funding, as more self-funded retirees will be necessary in the very near future. With the current ration of four workers for every retiree predicted to drop to three-to-one, the burden on the public purse will need to be relieved with more funding their own retirement.

Read the full story at News.com.au


Opinion: Get super right, now!

Despite the Super System Review of 2010, little has actually been done to improve the outlook for future retirees in Australia and it won’t get better any time soon.

Superannuation is a great idea, just one which Australia hasn’t quite managed to get right. Compulsory employer contributions and favourable tax concessions should be enough to help workers fund at least part of their own retirement, but too much confusion surrounds the current system.

When in power, the Labor Government used the superannuation system to help balance the books when budgets were tight. Lowering concessional contributions from $100,000 to $50,000 for those over 50 years of age really adversely affected the retirement savings of those who had not had the benefit of compulsory employer super contributions for all their working lives. And the subsequent tinkering with the concession cap which now sees it sit at $25,000 for those under 59 and $35,000 for those over 60 is just too confusing.

Increasing the superannuation employer guarantee, coupled with the gradual increase in Age Pension eligibility age to 67 was a step in the right direction to help people save more. However, the Coalition Government’s decision to suspend the guarantee increase for two years, as well as plans to remove the low income super contribution which only started last year, simply hurts those who need it most.

Report after report is released which models the impact of lower contributions, less retirement income and more people relying on government benefits, but it all seems to fall on deaf ears. While such reports look at the overall picture and deal in billions and trillions of dollars, they don’t touch the reality which faces retirees today. For those who did not have the chance to save enough through superannuation, living on an Age Pension of $827.10 per fortnight is the reality. And if we don’t address the situation urgently, an Age Pension may be a thing of the past, something this country simply won’t be able to afford.

Should people be able to pay more into superannuation to help with retirement funding? Should the government prioritise getting the superannuation system right? Would increased concessional contributions help your retirement nest egg?





    COMMENTS

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    Angel
    24th Sep 2013
    1:09pm
    It seems to me that politicians only think in the short term, they need to look forward to the years ahead and make it possible for Australians to live properly into old age, we paid our taxes all our working lives and trusted them with our super the least they can do is handle our money properly so that every Australian can live with dignity!
    tia-maria
    24th Sep 2013
    5:25pm
    Show the pensioner RESPECT
    Nightshade
    24th Sep 2013
    5:34pm
    In fact the political arena have not got a clue.
    And their advisers have not got a clue.
    Where did we the people get the idea that they were competent to run anything, let alone our nation.
    It is a snatch & grab mentality on the part of the political arena & the banking & financial sectors.
    They are like hungry street urchins.
    Place a dollar on the table & blink you eyes.
    Like magic - now you see it , now you don't.
    Australia needs people who can think, people who have vision & most important people who care.
    Not Lord & Lady Muck wannabe's who would sell their soul to run with wolves.
    tia-maria
    24th Sep 2013
    5:39pm
    Nightshade,
    your spot on mate, also our greedy politicians only look after themselves when it comes to their retirement........A HUGH PENSION AND ALL THE PERKS......I for one fed up with Politicians ripping off the tax payers dollars........they should live on what we are given and just maybe they would be more thoughtfull to us.
    Renny
    24th Sep 2013
    6:28pm
    Yes - and recent changes to the retirement age for age pension have disadvantaged many baby boomers. Some of us worked in areas where Superannuation wasn't available or wasn't talked about. Many of us fall between the well-off and not well off at all and are left to fund our own retirements by working until we're close to death. I've been working since I was fifteen and I've paid lots of taxes. As a childless couple we've seen families reap all sorts of tax breaks willingly, but in our older age I've been left to support my husband who has an acquired disability, which saw us lose what little super he had to cover bills. And even though he's past 65 I still fully support him and keep on working, while wondering if my Superannuation will ever be enough to allow me to retire. We're not poor, but if I retire in the next few years we will be.
    Nightshade
    24th Sep 2013
    7:15pm
    The Political Arena is using Australia like a personal Ticket To Ride.
    tia-maria
    24th Sep 2013
    9:16pm
    Renny, I feel for you as we fell in that bracket, and our bloody politicians dont give a damm about the retired and the semi retired if we suffer chronic health issues and yes what little super we got.........unfortunately the government should be helping us more with chronic health issues.
    retroy
    24th Sep 2013
    1:51pm
    You are correct Angel.
    The last mob closed down the opportunity for greater contributions to be made for super presumably on the basis of leftist/socialist dogma.
    It was held that where people who had enough money to contribute extra to their super must be taxed at excessive rates to bring them down a peg or two.
    No account taken of the facts where they probably worked hard to achieve a secure financial position and would not be a burden on the state.
    Not like some who managed to spend any extra on grog, smokes and the TAB, while living in a state house, and then said we are broke, and we want a government pension, and they get it.
    These non burden people also paid a lot more tax in their lifetime and made a decent contribution to Australia without seeking hand outs along the way.
    My personal tax rate was above 50% for a long time so there is also an argument for flat tax like Hong Kong.
    Hopefully, the new government will right this wrong and allow people who are in a position to contribute to their super nest egg, to do so without being penalized with tax.
    Renny
    24th Sep 2013
    6:32pm
    And of course the people this won't work for are the people who don't have extra money to contribute. But then the Liberal view is that's their own fault any way isn't it? Us bleeding heart lefties understand that the conservatives will make sure the already well off are taken care of.
    Hasbeen
    24th Sep 2013
    2:15pm
    Oh god, I get so sick of these inflated ideas of how much is required to live happily in retirement. These pushes for more money in super can only come from the super funds, & their fellow travelers. The younger person would be much better with the super money paying off their mortgage, rather than earning commissions for some super company.

    As a single pensioner I am living the Life of Riley on just over $22.000 a year.

    Yes I owned everything when I retired, & I got there after coming back to Oz in 76 with very little. I have a nice convertible sports car, & another classic [of the cheaper kind], which keep me busy, & offer great fun with like minded people, or old farts as some would say.

    I have managed to replace my ride on mower, my stove, washing machine & refrigerator all in the last 3 years or so, without having to touch my remaining capital, so it can't be all that hard.

    I have developed a little selective blindness, so I just don't see that a coat of paint would do my home no harm at all, but it's not going to fall down if it doesn't get it. As painting it would do more for what the kids can get for it, when I'm gone, they can paint it now, or then, as suits them, I'll just plant a few more shrubs, the better to hide it.

    I hope these scare campaigns don't get too many aging folk all worried about their future, as they don't need the worry. They don't need to worry too much either. With just a little common sense & care it is not too hard to have a very good retirement.
    HOLA
    24th Sep 2013
    3:39pm
    Hasbeen -- I know exactly what you are talking about. Although I do have some bad days financially on the Age Pension, I think of myself lucky because I am able to manage my finances. I don't have to have the latest gizmos, I make do with a television which is 15 years old. When that packs it in then I'll get a new one. My car is a 1988 Ford Laser and gets me where I need to be. When my washing machine packed it in I decided to rent one. $23.00 per month, it was brand new and after a few years I owned it, did not have to pay any interest on it. It still goes perfectly well. Fridge is 30 years old and goes terrific. Can't see any use getting a new one. There is no future, only today, lets live to enjoy it and stop worrying about petty things.
    Nightshade
    24th Sep 2013
    5:18pm
    How sad it is that the economy in Australia has been & still is only mediocre.
    That the "leaders' of this asset rich / capability rich nation have never had any savvy.
    But for them to live a life of pomp & ceremony according to the rule of others, their betters, in yesterdays time & space.
    Constantly bowing & scraping & yearning to be loved by the glitterati from abroad.
    We the people have been kept in a state of subjugation while our beloved nation has been given over to be looted.
    SUBJUGATE :-
    dominate
    overpower
    subdue
    conquer
    subordinate
    vanquish
    overcome
    reduce
    break
    repress
    smother
    silence
    suppress
    We may be grateful for our pitiful lot, but what about the future, what about tomorrow & those who come after us.
    It is we who have let it come to this.
    SHAME ON US !
    tia-maria
    24th Sep 2013
    5:24pm
    well guys you can manage your finances??..... most of us retired pensioners have always budget thats why we do cope,............. and on the other hand some of you been lucky to have super??....... but NOT every one has had it easy due to medical health ..........and all the outer of pocket expensive........(but My washing machine is 40 yrs Hoover,plus fridge,finally tv gone..................The government should give us more and show respect for what we have contribute to our country........and not the Asylum Seekers and Baby Bonus
    confucius
    24th Sep 2013
    3:32pm
    Well done Hasbeen! Couldn't agree more. As a pensioner I live on $20,000 with wife still working 2 days per week & house 'n car paid for we're reasonably comfortable (1 hol overseas annually as well). Not exactly life high on the hog, but can't complain. Reckon you're right about the must put more money in super assertions coming from the super funds industry. It's alarmist of course, after all, how many saw their super contributions go backwards in the '90s and during the GFC crisis -- we certainly did. As you say Hasbeen, common sense and a little prudence rather than expecting a million dollar retirement after 65 is the rational way to go...
    tia-maria
    24th Sep 2013
    5:15pm
    confucius, oh boy mate must be good to be able to holiday overseas once a year............good luck to you guys.........but remember so many retired pensioners who also worked hard and paid their taxes may have chronic health issues and unfortunately the rotten Politicians dont give a damm ih hell. cheers
    Grey Voter
    24th Sep 2013
    3:38pm
    Three cheers to you "Hasbeen" ! The more the Super funds grow, the more commissions and management fees the financial institutions pocket. Politicians as usual give them a hand with all the scaremongering. I also agree with you that people should be encouraged and helped to retire debt free. The rest, while not that easy, is easily managed. There are many other forces rushing to get their hands into our pockets: pre-paid funeral campaigns, thousands of unnecessary supplements ads, roof-renovators, solar-panels salespeople and what not......not to mention the unscrupolous gambling venues offering presumably seniors meals while all the time hoping to fleece you in their gaming rooms. I say, stay in control and the last years of your life will be pleasant.
    Grey Voter
    24th Sep 2013
    3:44pm
    Just a small wish: why can't the new Abbott Government let us pensioners enjoy the extra few dollars we receive from our overseas pensions when say, the Euro gains a bit over the A$ ? Centrelink computers are programmed to reduce our local pension automatically as soon as our Euro pension pays us even three dollars extra a fortnight. After all, businesses and investors take the benefit of currency exchange dealings, so how come pensioners have to stay close to the poverty line with no common sense vis a vis their aggregate pension. Sounds like radical communism to me where everyone is supposed to be as badly off as anyone else. Tony Abbott please note and NEVER ignore the grey vote.
    Jurassicgeek
    24th Sep 2013
    4:49pm
    The one problem I see with super is that nobody know how to mange it. If you just let the super run it's course without any input you could be missing out in the end. Super needs to be "managed" just like any investment. Unless you are an expert on such matters you may need to pay someone to look after it..and then you have the fees... There are a few options if you log into your account on line and you can do some stuff yourself....but for super to "perform" you need to get it managed properly...
    Paddles
    25th Sep 2013
    10:06am
    With a few exceptions (notably Has been) what a pack of bloody whingers have blogged here.

    Without boring you all with details, I worked for a pay packet all my life, didn't have any super as, for most of my working life it was not compulsory, but managed to save a few bucks, organised my self and wife into a retirement village and can actually save money on the Aged Pension.

    Apart from a maintenance fee which covers all rates etc and repair/replacement of all PC items, our only expenses are electricity and communications plus personal needs.

    That last word is critical and hasn't been touched on by others but the plain and simple fact is that, in the later portion of your life, your "needs" are much less and can be comfortably covered by the OAP.
    Rob
    25th Sep 2013
    1:22pm
    No matter under what conditions workers put their hard earned money into superannuation and, it is compulsory, what happened when the GFC hit? People lost a lot of their funds. Did our politicians lose any of their huge superannuation contributions. My guess would be that their super funds are guaranteed. Were any of the Wall Street boys who fandangled the GFC made to account for their tricky deals that caused total financial mayhem throughout the world? No. And so maybe the lesson could be only wish for what we need, rather than what we want. Politicians are in the game to stay just long enough to horde more of the taxpayers' money to fund their own very comfortable retirement. We are just the means to their ends. It's rather like the old feudal days of the Lords and Serfs. We fall into the latter category. The very frightening part of not having enough money in our latter days is when a very, very expensive urgent operation is required, no one wants to do that without a huge amount of money being paid upfront. The gap payment can and more often requires the potential patient to take out a loan (if they have any spare funds to service it). The alternative choice is not there, particularly if you are relying on a public hospital waiting list.
    NeilC
    25th Sep 2013
    1:43pm
    Love the comments as they all hit the nail on the head, but do our pollies read pages like this, probably not would be my guess. Maybe we should all get our local State and Federal MPs e-mail addresses and invite them to subscribe to this and other similar sites where we put our case.
    Rob
    26th Sep 2013
    2:06pm
    NEIL C - The website for all federal politicians' email addresses, etc. is WWW.OPENAUSTRALIA.ORG.
    Fair Go
    30th Sep 2013
    8:41pm
    Problem is, some time in the not too distant future, there won't be a pension to prop people up. The whole system needs to be changed, and quickly. Workers need to be taxed for their retirement fund, like in Europe, and whatever they manage to save as well, if they can, is a bonus as it is not means tested. But it won't happen here, it is too sensible and works too well.
    simo60
    13th Jun 2017
    4:36pm
    Why does every blame the government ?? I always work within the guideline . Still manage to make it


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