This week the Grattan Institute released its controversial Money in Retirement: More than Enough report, which while admirable in that it raises a topic in dire need of debate, is based on questionable assumptions.
YourLifeChoices surveys real retirees on a regular basis. Each quarter, we release the Retirement Affordability Index™, which outlines the true cost of living in retirement across six very different retirement tribes.
The Grattan Institute report is based on general Household, Income and Labour Dynamics in Australia (HILDA) data and estimates. The findings of the report rely on averages, so someone with super savings of $6 million and various other assets – who we would call an ‘Affluent’ retiree – increases the reported ‘average’ balances for Constrained and Cash-strapped retirees, thereby creating misleading figures overall.
The reality is that the median Australian super balance hovers around the $100,000 mark – far short of Grattan estimates.
The Australian Institute of Superannuation Trustees (AIST) states that, “based on SG contributions alone, a full-time worker on average wages from 1992 to 2014 should have super assets of around $131,000. Those on median wages over this period should expect to have around $95,000 in super. Anyone on lower wages (half the working population), or who spent time out of the workforce over the past 23 years, will have less, in some cases a lot less. Not surprisingly, for members in major industry funds approaching retirement – i.e. those in the 60-65 age bracket – average balances are below $100,000. It is estimated that less than five out of every 1000 (i.e. less than 0.5 per cent) members of APRA-regulated funds (i.e. Non-SMSF) have $ 1 million or more in super.”
Even the super balance for those aged 55 and over averages only between $180,000 and $355,000. Is either estimate really enough to fund a comfortable retirement?
Australia now spends more on superannuation concessions for those who are well off in retirement than it does on the Age Pension.
Even by Grattan’s own admission, the number of retired renters – those currently doing it hardest – stands to increase from 16 per cent to around 43 per cent by 2056. Therefore, an alarming number of future retirees who do not have sufficient super will be living in poverty.
We know that real retirees are struggling to make ends meet. The steadily rising cost of living, increasing insurance premiums, soaring fuel and energy costs and the almost assured need to somehow fund their own aged care plan at the third stage of retirement also projects a dim future for many retirees.
Rather than assume the financial situation of Australian retirees, today, we’re asking real people to reveal the reality of retirement.