7th Nov 2018
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Comment: Report paints a false view of retirement ‘heaven’
Author: Kaye Fallick
Pensioners doing it tough

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.

Seriously?

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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    COMMENTS

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    Paddington
    7th Nov 2018
    11:16am
    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.
    john
    7th Nov 2018
    12:05pm
    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.
    OnlyGenuineRainey
    8th Nov 2018
    9:32am
    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.
    Paddington
    9th Nov 2018
    1:30am
    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.
    Old grey
    7th Nov 2018
    11:30am
    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)
    4b2
    7th Nov 2018
    11:45am
    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.
    Old Geezer
    7th Nov 2018
    2:04pm
    As a SFR I would use very few of the Pension Benefits. Medical and hospital costs are covered by Medicare or Private Health insurance not the pensioner benefits.
    OnlyGenuineRainey
    8th Nov 2018
    9:33am
    Again, because you claim to get everything free. Only sadly it's not on offer to others free, regardless of your lies.
    Kali-G
    7th Nov 2018
    11:51am
    me thinks this is "fake" media...
    1984
    7th Nov 2018
    1:37pm
    Please explain how you came to this assumption comrade Kali-G
    john
    7th Nov 2018
    11:56am
    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!
    OnlyGenuineRainey
    7th Nov 2018
    12:19pm
    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.
    OnlyGenuineRainey
    7th Nov 2018
    12:16pm
    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?
    Old Geezer
    7th Nov 2018
    2:02pm
    Rubbish!
    Mad as hell
    7th Nov 2018
    5:48pm
    Agree with you OnlyGenuineRainey.
    OnlyGenuineRainey
    8th Nov 2018
    9:31am
    What's rubbish, OG. Half of what I said you've agreed with strongly in other posts.
    OnlyGenuineRainey
    7th Nov 2018
    12:23pm
    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%.
    OnlyGenuineRainey
    7th Nov 2018
    12:26pm
    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
    Old Geezer
    7th Nov 2018
    1:31pm
    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.
    Lothario
    7th Nov 2018
    1:50pm
    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
    OnlyGenuineRainey
    7th Nov 2018
    5:30pm
    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.
    Charlie
    7th Nov 2018
    2:06pm
    I told this story before but its worth telling again..

    As I was walking down the street I met an a work associate who had retired a long time before me .

    I said. "how ya doing, your looking well" ..He said "It might look alright, but it doesn't feel any good"

    Such is the case with retirement and old age, It doesn't matter what you've got, if it doesn't feel any good, money can ease it a little, but it may still be hard going.
    Old Geezer
    7th Nov 2018
    2:36pm
    No matter how much people get it is never enough.
    Triss
    7th Nov 2018
    3:05pm
    Is that yourself you're talking about, OG, what with grabbing free hampers that are for the needy, rushing off to stay in your free hotel resorts, discounts, cruises, free medical and dental, free this and free that whilst envying folk who get the pension when you don't.
    Old Geezer
    7th Nov 2018
    3:13pm
    Well Triss they are available to everyone so it's your fault if you are missing out.
    Triss
    7th Nov 2018
    5:13pm
    I like to think I'm not a bludger.
    OnlyGenuineRainey
    7th Nov 2018
    5:29pm
    I'm sure you are not, Triss. OG certainly is. A mean, nasty, greedy, self-serving BLUDGER who steals food hampers from the needy and tells hideous lies to denigrate everyone who wasn't born with a silver spoon in their mouth as he was.
    Old Geezer
    7th Nov 2018
    6:35pm
    ROFL
    MICK
    7th Nov 2018
    2:21pm
    Kaye: I just got through reading the right wing Grattan Institute bit. Only just picked myself up off the floor and still hyperventilating from the laughter.

    We all need to realise that groups like Grattan are top end of town promotional organisations looking after...the top end of town. They want workers to work forever, superannuation and wage increases to never occur so they spin the yarn that retirees are doing well. The reality is otherwise and you would have a better handle on this than I even though I hear the stories and see how poor many retirees are. Only a handful are doing well.
    Grattan is an irrelevant propaganda machine like the mainstream media. Put there to deceive average citizens and placate then so that they will think their poverty is unique to them rather than widespread wealth transfer to the top.
    Old Geezer
    7th Nov 2018
    2:36pm
    Mick The majority of retirees are doing very well.
    Lothario
    7th Nov 2018
    2:38pm
    And those who are not don’t know how to manage money
    Old Geezer
    7th Nov 2018
    2:50pm
    O agree their money management skills are certainly lacking if they are not doing well.
    Triss
    7th Nov 2018
    3:12pm
    How on earth do you know that, Lothario and OG? Have you gone into every pensioner's home and asked to see the account books? Those postings are based on your dogmatic opinions not evidence based facts.
    Old Geezer
    7th Nov 2018
    3:14pm
    How do you know Triss that we are wrong? You must of gone into every pensioner's home and check their accounts.
    Lothario
    7th Nov 2018
    3:16pm
    Touche Old Geezer

    I know because I have friends on OAP, and they actually save every year to go on overseas holidays
    Old Geezer
    7th Nov 2018
    3:19pm
    I agree Lothario. One has only to look at why we have such a big cruise industry in the summer in Australia today? We can thank the Australian welfare system for that.
    MICK
    7th Nov 2018
    4:04pm
    Sounds a lot like paid comment from a couple of the usual characters.
    I often read of the struggles from retirees on this website and assuming we are getting a fair cross section it appears all is not well.
    I agree with you Triss that the true figures are unknown. But the anecdotal evidence is that many retirees are struggling.
    Indeed the repeated and ongoing attacks from the current government have weakened many of us other than those on defined benefits like OG. Very few of us have parliamentary pensions so OG needs to thank his lucky stars rather than make out a case he is not involved in. Getting a defined benefit for life is completely different to getting a market linked return like dividends where nothing is guaranteed.
    The current government is a scourge and retirees will rightly spit it out. Shorten needs to fix his line in the sand though so that hard done by self funded retirees can make a living rather than live in poverty.
    Fliss
    7th Nov 2018
    4:37pm
    Interesting little "back & forth" going on here.
    I agree with much that has been said . . but . . . wait till you need to go into Aged Care - with a RAD of at least half a million dollars plus monthly fees of around $3200/month. How comfortable will you feel then?
    Triss
    7th Nov 2018
    5:12pm
    One of your previous postings, OG, stated you spent less than USD20 on your cruise so presumbaly others can do the same thing. I don't think the cruise lines will get very fat on USD20 and I don't think you need to worry about pensioners or the Australian wefare spending USD20 of their pensions on cruising. In fact, knowing the way medical folk charge, I would think the Australian Welfare forked out more for your medical and dental bills than it would for a cruise.
    Old Geezer
    7th Nov 2018
    6:37pm
    Agree it costs Medicare and the Health Fund a lot more a year than it does for me to go on a cruise.
    OnlyGenuineRainey
    7th Nov 2018
    9:15pm
    Why shouldn't a retiree who worked hard and saved well go on a cruise or two after retirement. Many had very little opportunity to holiday while working. If they saved for a few good holidays when their working life ended, they are ENTITLED to use THEIR money for the pleasures they were deprived of in working life. Those who took expensive holidays now live off the taxpayer, yet some nasty creeps begrudge those who sacrificed most the use of THEIR OWN MONEY.

    As for pensioners taking cruises - well if the STUPID IDIOT RICH WEREN'T SO GREEDY and abolished the means test, which should NEVER HAVE EXISTED, there wouldn't be a need for people to spend their money so they keep their pension. GREEDY IDIOTS created the problem and GREEDY IDIOTS are whinging about it.
    George
    8th Nov 2018
    8:01pm
    Absolutely agree with you, Mick. Grattan Institute needs to be shut down.
    Trolls ignored, all should do that.
    Also, agree with OGR's comments above.

    Only solution presently is to have an Independent Review of retirement incomes IMMEDIATELY. I strongly recommend an outcome which focuses on scrapping the whole pension / retirement system and implementing Universal Pension based on simple, basic qualifying criteria such as Age 65 and Residency of say 15 years. With a subsistence allowance for those who are deserving but may not qualify.
    George
    8th Nov 2018
    7:50pm
    Kaye, very good comments.
    It is a disgusting lie from Grattan Insitute, the rich man's mouthpiece, to suggest retirees have over 90% of pre-retiree income hence they are doing OK. They are in la-la land, not living in Australia. The comment "According to the Australian Institute of Superannuation Trustees (AIST), the median super balance for those about to retire is $95,000." shows what people really have to live on, besides the Age Pension if they are entitled to it. While also planning for contingencies regarding health, etc.

    This disgusting attack on the less-wealthy needs to have a strong response from YLC as a retirees group, and retirees in general. The funding sources of Grattan Institute needs to be exposed, and their operations need to be shut down. Maybe a petition needs to be launched to investigate this right-wing mouthpiece to expose their funding and political backers and develop enough pressure to shut them down.


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