How much is enough for retirement?

How much is enough when it comes to your retirement nest egg?

How much is enough for retirement?

‘How much is enough?’ is the question posed by Challenger front man, Jeremy Cooper, who says that $1 million won’t cut the mustard. But are his sums accurate?

In yesterday’s Australian Financial Review the Chairman of Retirement Incomes at Challenger, Jeremy Cooper, shared his opinion that a $1 million nest egg barely keeps pace with the Age Pension, let alone supports a comfortable retirement. Mr Cooper suggested that the current debate about superannuation tax concessions was “at risk of misleading the vast majority of ordinary Australians about the super balance they need to fund a comfortable retirement”. He went on to state that the assumption was that $500,000 or even $1 million would suffice, when it would barely translate to the equivalent of the rate of the Age Pension:

“That’s right, the full Age Pension (including supplements) would cost a 65-year-old couple a surprising $1,022,000 to buy today.” And a single 65-year-old woman, Mr Cooper asserts, would need $666,0000 to fund the equivalent of the full single Age Pension.

He concludes that we need to get over our ‘lump sum’ mentality and concentrate on the income our savings will generate in order to understand the true cost of retirement – as well as “the fairness of any proposal to change the tax regime for retirement savings”.

Read more at SMH.com.au.

Opinion: One size NEVER fits all

Mr Cooper is right and wrong. He is right to remind us that it is our potential income that matters, not our lump sum. But he is very wrong to suggest that one size ever fits all.

And he is even more erroneous in his assertion that tax concessions assist self-funded retirement when they are first and foremost a gift from taxpayers to the wealthier section of our society.

So let’s consider the merit in his argument. Firstly, the understanding of retirement readiness in terms of your potential lump sum is clearly a false basis on which to plan for the future. It is the income your savings can generate over the years you are expected to live (your longevity) that matters most. But here we must part company with Mr Cooper’s maths, as he seems to base his notion of a $33,717 (i.e. a full pension, including supplements for a couple), income stream from a $1,022,000 nest egg in the belief that interest rates will remain at their historically low levels for the foreseeable future – which they probably won’t. Take a look at this graph from the Australian Bureau of Statistics if you need any reminder of how volatile the cash rate can be:

And those with longer memories will recall even more volatile fluctuations when 18 per cent was the norm.

So how far $1 million will stretch really depends upon a range of external economic variables we can’t even begin to predict. All we do know is they will, in all probability, be VERY different from today’s.

But the main flaw in Mr Cooper’s argument is the ‘one size fits all’ approach – an approach that has been comprehensively discredited by most academics when grappling with the vexatious issue of how to measure retirement income adequacy. In a recent Melbourne Institute Working Paper (2014), authors Burnett et al have concluded that ‘one size fits all’ is a poor indicator of retirement adequacy, as those on low incomes find an income stream such as the Age Pension a strong support, whilst those on high incomes can find an 80 per cent replacement rate insufficient to maintain previously enjoyed living standards. It’s not rocket science – if you have existed on very little, a nest egg of $1 million will, over years of fluctuating interest rates, probably provide a reasonable income. If you are used to a higher wage, then a $1 million next egg may not be enough to cover your needs – and wants.

But these are minor quibbles when it comes to the real issues related to retirement income.

The first is that the Australian retirement income system is in desperate need of reform, and an inquiry is the much needed first step, as evidenced by the 84 per cent of respondents to the YourLifeChoices 2015 Budget Submission survey who rated such an inquiry as either important or very important.

There are three main problems with our retirement income system and they can be summarised in three terms: inequity, lack of trust, and complexity. We currently have a system where the basic rate of the Age Pension is below poverty. That’s inequitable. Yet $45 billion a year is poured into superannuation concessions for those who can afford to fund themselves without this handout. Fund managers and planners who are paid handsomely (the third highest fees in the OECD) to advise us have been found guilty of ongoing poor practice, if not white-collar crime. And the Centrelink application form for an Age Pension runs to 26 pages. Inequity, lack of trust, and complexity rule. We deserve better.

What do you think? Is Mr Cooper right to raise the alarm bell about insufficient retirement savings? And is $1 million a useful benchmark? Or are there deeper problems.





    COMMENTS

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    Hobbit
    21st Apr 2015
    10:31am
    Challenger front man, Jeremy Cooper seems to be inflating things for political gain.
    Using an on-line Annuity Payout Calculator set @ 3% interest for a 20 year period; one million would buy:
    the amount you can retrieve Every year $67,215.71
    After 20 years with 3% inflation adjustment, it is equivalent to current money of $37,215.71
    So even after 20 years it's still better than the pension
    particolor
    21st Apr 2015
    7:45pm
    Confucius Say .. Always Blow Balloons Up before Party Starts !! :-)
    Sapper
    21st Apr 2015
    10:54am
    "And he is even more erroneous in his assertion that tax concessions assist self funded retirement when they are first and foremost a gift from taxpayers to the wealthier section of our community."
    Hang on. Isn't the pension a gift from taxpayers to the poorer section of our community?
    Self funded retirees have paid taxes on the money invested in their retirement income - a lot more taxes than the pension recipient has paid over their working life - unless the pensioners made a lot during their working life and spent it all on a high flying life style.
    Fair is fair.
    Patriot
    21st Apr 2015
    11:27am
    Sapper,
    May be pensioners that "Did not have the money to SINK (avoided paying Taxes) into Massive super Accumulations" via TAX-Lurks-&-Perks" should be considered as being "Sapped off their Wealth" as a "Wage Slave"???.
    MICK
    22nd Apr 2015
    1:06am
    Correct Sapper. The current superannuation incentives have been put in place exclusively for wealthy Australians. These are to only citizens who are ABLE to move considerable amounts of money out of the (real) tax system and the park it in the superannuation tax haven to avoid the tax system.
    Peterrj
    22nd Apr 2015
    3:04pm
    Hey Sapper, they just don"'this get it do they?

    Please re-read Sapper's point, "... the pension a gift from taxpayers to the poorer section of our community'.

    Alas, this is an unpleasant truth for many!
    Blossom
    22nd Apr 2015
    11:55pm
    I paid ordinary tax rate on the money I put into superannuation. I didn't have an option to pay in the system where it is deducted before taxation is deducted. I accumulated more funds because I spent money wisely - not on tobacco, alcohol and gambling. I had an uncle who was a heavy drinker. He spent more on alcohol than food for his family of 4. They lived on all homecooked meals- they grew vegetables and had fruit trees from which she also preserved surplus vegetables and fruit, and made jams and chutneys.
    .My Aunty made a lot of their clothes, some of the fabrics she was given by other people, knitted their jumpers, cardigans, coats etc.
    My parents did the same thing, except my Dad didn't consume alcohol at all and didn't gamble. Mum also did all the things my Aunty did. We got a couple of bought outfits a year for "best"wear. The rest were home made -except school uniforms.
    Tomaso
    21st Apr 2015
    11:32am
    INEQUITY, LACK OF TRUST, COMPLEXITY, say's it all really.!
    MICK
    22nd Apr 2015
    1:09am
    I'd be inclined to add intentional DISHONESTY into the mix as well because the over-generous concessions were never set up for hand to mouth Australians.....who are gorced to consume all they earn.
    Tom Tank
    21st Apr 2015
    11:46am
    The nub of the issue here is that we have someone, probably on a bonus system, pushing hard to get more money invested in Superannuation.
    Would you trust a used car salesman's word about his product? (No gender bias or insult to used car salesman intended).
    Beware the salesman spruiking their own product.
    Fready
    21st Apr 2015
    11:48am
    Hobbit, where is the calculator. I 'd like to see it because the payout is twice what a term deposit pays. TD about 3.2%, annuity 6.7%. Seems too good to be true.!!
    Hobbit
    24th Apr 2015
    11:38am
    http://www.calculator.net/annuity-payout-calculator.html
    Stof
    21st Apr 2015
    12:21pm
    Somebody's maths is a bit awry. a simple calculation of 3% on $1m is $30,000. Where on earth does Hobbit get $67,215.71? If you add inflation @ 3% the figure can only get worse, not better.
    The figure quoted probably includs the pension and a slowly reducing balance to zero after 20 years.

    So after you turn 85, just when you might need money for health issues you either must die or beg.

    HOBBIT; you need to do your homework first before quoting erroneous figures!
    MICK
    22nd Apr 2015
    1:13am
    You may be working on bank interest here: a guaranteed way to run out of funds over time. Retirees need to work on assets which have a capital gain over time and also give a return on capital.
    Hobbit
    24th Apr 2015
    11:37am
    Failure to understand annuities. In addition to compounding interest there is also a annualised payment of the principle. Try it for yourself:
    http://www.calculator.net/annuity-payout-calculator.html
    KSS
    21st Apr 2015
    12:50pm
    I wish people here would get over themselves and stop whining about those who have taken action to provide for their retirement. It seems to me people are hell bent on consigning everyone to the lowest possible financial position for no other reason than they did not provide for themselves - regardless of the reasons they didn't. The green-eyed monster is alive and well.

    Instead of complaining about how much $1m would generate above the aged pension, (and has been shown before it is not that much more and in some cases is actually less) why can't you be happy for those who may not have to 'survive on the pittance' you collect from the tax payer? But NO! You want to strip them of their nest-egg.

    Most people who have or will have $1m in super do not have 'massive super Accumulations' by avoiding paying tax as Patriot would have you believe. Most would be ordinary working people who have gone without holidays, contributed annual tax refunds, perhaps salary sacrificed, took lunch to work instead of buying it each day and made a thousand other financial decisions in order to add to their super fund. And now you want to take it from them because you did not make the same commitment to your own retirement?

    To some $1m may sound like an enormous amount but then so does $100 to someone who has absolutely nothing. If you want the aged pension to be increased then you should be grateful that potentially more people will be funding their own retirement thus possibly freeing up resources that can be redistributed to a smaller pool of retirees.

    And make no mistake, the taxes paid by those funding their own retirement through super and investments will be going towards paying your pensions, your discounted medications, your discounted travel, your discounted utility bills, your lower rates, your free car registrations and all the other state and federal concessions made to pension recipients.
    LiveItUp
    21st Apr 2015
    1:14pm
    I agree these people who want the most for nothing enough would never be enough for them in retirement. It's the tall poppy syndrome again this time in the retirement scene. Get over it and be thankful for what you get and stop worrying about others who may have what you cannot get. Where do you think your pension comes from if you haven't provided for it yourself? TAXES being paid for by others.
    Not Amused
    21st Apr 2015
    1:16pm
    If any of us have hopes to live reasonably comfortably in retirement, we are wise to make early plans and ensure a nest-egg. My sister took a lump sum on early retirement at 60, qualified for a very small superannuation pension (with the view of having it subsidised by a part-government pension at 65). From her lump sum, she gave away $60,000 (mandatory five years before applying for a taxpayer-funded pension), went on an expensive world trip and bought a new car. Whilst working, she enjoyed expensive holidays, bought lunches at work every day and enjoyed domestic luxuries, clothes and eating out that I would never even have contemplated. With her, it seemed to be a case of instant gratification. Enjoy today and let tomorrow take care of itself. Now she is feeling down, complaining that I am better off and she is a poor pensioner with a mortgage yet to be paid off (by way of expected inheritance, I suspect). I went without, paid off my modest home at a young age, took cut lunches to work, had no luxuries and very few interstate holidays, driving around in my older car knowing that new cars are the worst investment and the quickest way to wave one's money goodbye. So it's up to us. We reap what we sow. The green-eyed monster is always hovering around places like this, trying to discredit successful, sensible people who know how to prioritise, go without, manage their lives and their income to best longer-term advantage. I say hats off to these people, and I bet their kids had damned good role models for parents.
    Anonymous
    21st Apr 2015
    2:14pm
    Well their we go you have all got it right and its good to see people who can look after themselves after some sacrifices.
    Rob
    21st Apr 2015
    3:40pm
    Nicely articulated KSS. Those on handouts should be thankful that a significant number of self funded retirees have worked hard and had the vision to build their super for their later years. Without this approach the drain on the public purse would be even higher.
    MICK
    22nd Apr 2015
    1:27am
    Your normal ignorat rant KSS:
    1. nobody objects to well off Australians accumulating retirement funds but currently this is done on a 'casino' style basis and. AS YOU ARE WELL AWARE the superannuation system is essentially a money laundering vehicle for the rich. That is what is unfair.
    2. you keep saying that the rich have paid for the retirement benefits of the poor and you seem to insinuate that average Australians should be beholding for this. The reality is that the country does not belong to 1% of the population and that money earned by the 1% is not ALL theirs to keep. THAT IS WHAT GOVERNMENTS DO. If it were not so we would be like the US where average Americans have been turned into the dirt poor whilst obscenely rich folk complain about paying even the low rates of tax they are adked you pay.
    So get real KSS, or is it Frank????, as you cannot force an unjust system onto this country. Thay is why the current dishonest system has to change. Given that this government has no intention of changing the rorts gor the rich it now remains for decent Australians to get rid of thid bunch of mismits at the next election.
    Peterrj
    22nd Apr 2015
    4:14pm
    KSS highlights that not only do pensioners receive the pension but also other economic benefits such as: discounted medications, discounted travel, discounted utility bills, lower rates, free car registrations, perhaps rental assistance and all the other state and federal concessions that are made to pension recipients. So put a dollar figure on the true nett economic benefit of the full aged pension for a married couple??? $35,000 ... Perhaps it could be even $40,000. So what do I have to do to receive an annual pension payment for myself and my wife??? Live to pensionable age ... And that's all. Nothing more and nothing less. Now what do I have to do to be a self funded retiree placing no economic burden on the cash poor Governement? I and my wife have to save a Superannuation balance of ...... between $700,000 and $800,000 by pensionable age. If I draw down 5% from my hard won nest egg I get exactly the same economic benefit as the person who has never saved a penny in Superannuation!!!!! Now tell me, who is the mug at pensionable age??? Yes, many of the readers are correct, Superannuation is a scam ... But it is being committed upon those mugs trying to save enough to pay themselves the same or less than what the pension will pay them for doing exactly and precisely nothing!!!
    Blossom
    23rd Apr 2015
    12:00am
    I agree with you Peterrj, you probably won't get health care card either.
    maxchugg
    23rd Apr 2015
    1:22pm
    Not Amused, I totally agree. My wife and I also observed the strictest economy during our working lives and provided for our retirement. We are not wealthy but comfortable and enjoying our retirement, making no apologies for only reaping what we have sown over 40 years in the workforce.
    We realize that our good fortune was to live in a time of reasonably full employment. Sadly the same cannot be said for many of those in the workforce now and we certainly feel for those who are currently seeking work and suffering economic disadvantage that is likely to dog them all of their working lives and into their retirement because of their inability to make adequate provision for an income after they turn 70.
    Anonymous
    24th Apr 2015
    12:59pm
    I think the problem is that we have to divide the population into segments and examine each separately. There is the segment that work really hard, try to save, but honestly cannot attain ''self-funded'' retiree status no matter how hard they try. It's easy to blame, but not so easy to appreciate the obstacles some face. Consider those who grew up abused in institutions and were forced into work at 15 with no education, skills, self-esteem or guidance - and possibly with poor physical and mental health as a result of early abuse. Consider those who struggle with chronic ill-health, or who suffered crippling work injury (many in my age group never heard of compensation!). Consider those whose children are born with major disability and who give their life to caring. There are lots of reasons why battlers are left poor in old age, and those in this group ARE ENTITLED to expect the taxpayer to support them adequately. That's what we do in a caring society.

    The second group - that I suspect includes the vast majority of full pensioners and many part pensioners - consists of those who could have saved to fund their own retirement but chose, instead, to live a less frugal lifestyle. They spent their money on travel, restaurants, nice clothes, modern cars, etc. while others battled along sewing, growing, building, and making do. I include, also, in this group those who did accumulate a nest egg but have contrived to maximize entitlements by, for example, spending or gifting their money before age 60. This group appears to be the most demanding and the quickest to scream that the modestly well-off should be stripped of all they have to fund higher pensions.

    The third group comprises those who have attained a modest nest-egg and may be just over the assets limit, or may be receiving a very small part pension.

    And the fourth group comprises the privileged, who had an easy life and were able to achieve a healthy nest-egg to fund their retirement without sacrificing lifestyle during their working life. (Some of these worked hard and smart, but were also fortunate. Others did very little to deserve their wealth but inherited it or acquired it through pure good luck or through unethical means.)

    Determining accurately who fits in which group is difficult, and for that reason it's almost impossible to create a truly FAIR system. I believe our first priority must be to ensure that those in the first group are adequately cared for. The second should be to ensure that those in the third group enjoy their just rewards - and under the present system, they don't. Most proposals I've seen for reform suggest that they will be even worse off, and sadly the green-eyed monsters, mostly from the second group, seem determined to see this third group punished for their diligence.

    The fourth group have been obscenely indulged by the taxpayer with grossly unfair concessions and tax dodges of all kinds - and this is where the system needs urgent reform. The Greens put forward a logical and fair proposal that suggests people's superannuation earnings should be taxed like their regular earnings - so that those on low incomes earn tax-free or at very minimal tax in super and those on high earnings pay a marginal rate on super earnings similar to that which they would on earnings outside super. Concessions should be distributed evenly to all - rather than the current system of giving 33c in the dollar concession to the high income earner and 0 or -15% to the lowest earners. Their proposal doesn't appear to include retirement incomes, but addresses tax on superannuation contributions and earnings during working life. Perhaps it needs to look at retirement earnings as well.

    It seems to me, though, that the most discriminated against group is the hardworking and frugal savers who attained assets of just over the limit for a pension. At today's minimal investment return rates (unless they go into risky investments), and excluded from pensioner benefits, this group can actually end up worse off than pensioners, or only marginally better - depending on their state of health, need to use public transport, etc. And this group seems to be suffering endless attack from the green-eyed monsters who enjoy government handouts, as well as threats of cuts from all sectors of politics. It's wrong! Those who worked hard and sacrificed much in terms of lifestyle to attain a position of modest comfort in retirement SHOULD be substantially better off than those who rely on taxpayer handouts. If people go without in youth, expecting rewards later, they ARE ENTITLED to enjoy those rewards. I've seen comments suggesting they should have to erode their nest egg and have nothing to leave their children on death. Why? If someone CHOOSES to forego holidays, restaurant dinners, new cars, and nice clothes and jewelry because they WANT to leave money to their offspring, why should they be denied that right? How is it reasonable to suggest that X has the right to spend on whatever he chooses and draw a pension later, but Y has no right of choice as to how the money he earns is used because he made a different choice in earlier life?

    Remember, please, that many who are just above the assets limit DID NOT enjoy significant concessions and tax benefits. Those limits apply even when money isn't in superannuation but is regular savings. Many had no employer-funded super but allocated money voluntarily, and in many cases they didn't start putting in to super until later in their working life and didn't get much in the way of concessions at all.

    We worked hard for our retirement. We went without a great deal to save. We watched others enjoying holidays and nights out while we built our own home (at night and on weekends, with our own four hands, and no formal skills or training), kept old bomb cars running, grew vegetables, made our own clothes and furniture, etc. Why shouldn't we now be allowed to take that once-in-a-lifetime holiday we saved so hard for, live in a nice home, and expect to enjoy a higher standard of living than pensioners and still have something left to leave to our offspring? Why should we be denied the right to draw a lump sum to buy a new car or renovate a kitchen or pay for extensive dental care etc. - or even to give our children or grandchildren that desperately needed leg up that we didn't enjoy? If that means we end up drawing a part pension, how is that any less fair than those who enjoyed these things in their younger life now drawing a pension?

    I don't object at all to contributing to the cost of supporting those in the first group - battlers who are still doing it tough in old age because they faced insurmountable hurdles - but I do object strongly to foregoing luxuries or the right to leave money to my kids so that people who enjoyed a much higher standard of living than I or who contrived to achieve pension eligibility unfairly can draw generous taxpayer-funded pensions. And I certainly object to obscenely generous taxpayer-funded handouts to the privileged - and even to many middle-class families who really don't need the family benefits that are so generously thrown about and are using taxpayers' money to fund family holidays in Bali or pay for lavish mansions.
    Blinky Bill
    21st Apr 2015
    2:43pm
    As self funded retirees we agree with "KSS" comments and have a similar story as "Not Amused" My wife and are very fortunate in never having had to ask centrelink or anyone else for a handout. My wife gave up work to be with our children, which caused us to be a one income family for 8 years. She returned to work parttime on Thursday nights and Saturday mornings, while I was able to look after our children. She continued to work part time up until retirement and only worked fulltime to assist her employer when someone went on annual leave. Whereas I have worked fulltime in an average job, however I have always tried to use my time well by continuing to educate myself in various ways - to carryout home repairs, not buying new vehicle and doing most of the repairs myself, learnt to build and maintain my own computers. I have added to our income from the stock market and property with my money, my risk and lots of hard work. Yes, I salary sacrificed for the last few years of my working life, which incidentally saved me $34,768 in tax. This is just slightly more than one year of pension for a married couple and we have been retired for 18 months and will not get any (part) pension for approximately another 10 years now. This would have been a shorter period, but the changes on 1/1/2015 have now made us worse off. I know of others and have a couple of friends who could have been in the same situation as me, but they thought that going out three or four times a week, drinking, smoking, punting on the ponies and having a good time was the way to go and now they all either get a full or part pension, while some suggest I am a fool. Everyone has a right to his or her opinion whith some making assumptions about others, instead of dealing with the facts. By the way both of our children, who are nearing forty are close to owning their own homes and will do so by age forty. Am I proud, not really, but pleased to know that my wife and I have raised two responsible and financially independent children, who also contribute to their communities. So please do be objective and respectful with your comments and don't lump all self funded retirees into the muddy waters created by some.
    MICK
    22nd Apr 2015
    1:32am
    My wife and I are self funded and have way less than the figures mentioned in the (so called) must have story above. We manage well on our crumbs.
    The issue here is not about the ability to save up enough money to manage. The issue is that the current system has been set up specifically for rich people to rort the system. That is the point.
    Sapper
    21st Apr 2015
    3:19pm
    "The Budget should be balanced, the Treasury should be refilled,
    public debt should be reduced, the arrogance of officialdom should be
    tempered and controlled, and the assistance to foreign lands should be
    curtailed, lest Rome will become bankrupt. People must again learn to work
    instead of living on public assistance." - Cicero, 55 BC

    So, evidently we've learned bugger all over the past 2,069 years.
    particolor
    21st Apr 2015
    8:07pm
    I like the Arrogance of Officialdom bit ! :-) Cicero was in the Masons Super Fund !
    MICK
    22nd Apr 2015
    1:38am
    And average and poor Austrlians shoul pay for all of the above whilst well heeled Australians are exempt?
    I like your post though. But don't expect either side of politics to be responsible enough to give a damn. Politicians for the most part don't give a damn as they behave like alcoholic drunks with huge egos to massage.
    particolor
    21st Apr 2015
    5:09pm
    A Used Car ER!! AMP Sales man told Me in 1965 that if I put just 12 Shillings a Fortnight into the Assurance Policy He was trying to flog Me, I could walk around like the Monopoly Man with a Big Cigar and Top Hat when I retired !! I took the Policy and cashed it in in 1995 when I left the Railways ! I got $3,800 Buck ! I wondered Where I should Retire with Such Wealth ? Outer Mongolia or Monaco ?? ..I think He was from Jupiter ? :-)
    MICK
    22nd Apr 2015
    1:40am
    The superannuations salement (conveniently) omittec to mention the 'I' word: inflation. Funny that.
    wally
    22nd Apr 2015
    10:51am
    Yep, inflation is the big unknown in any investment planning for the future. My "Plan B" is to buy hope in the form of Lotto entries.

    21st Apr 2015
    7:00pm
    $1 million - is it enough for retirement? This depends on many factors, such as:
    Are you single or with a partner?
    At what age are you retiring?
    Do you own your own home and are repairs/renovations, etc. required?
    How is your retirement savings invested and what does it earn?
    Do you have any significant unpaid debts, mortgages, loans, etc?
    And probably the most important question - is your "nest egg" enough to support the lifestyle you are comfortable with or used to - be it watching TV, sailing the seas, dining out when and where you want to, or just walking the dog and smelling the roses?
    Keep in mind the difference between need and want, and if you can satisfy both during your retirement years you're doing very well. Good luck.
    Kaye Fallick
    21st Apr 2015
    9:28pm
    HI Fast Eddie - great points - need v. want is huge - most of us don't really understand how important the distinction is.
    MICK
    22nd Apr 2015
    1:42am
    Pretty well covers the difference between many of us and the choices we make Edide.
    Stof
    21st Apr 2015
    7:30pm
    I'm really surprised by Patriot assuming that we all had money to sink into super funds. It's not about how much you earn, it's about how much you spend.
    We arrived in the country 20 years ago with no money and no super. We both scrimped, saved, bought a cheap house in a cheap area, slowly saving as much as we could. THE MAGIC OF COMPOUND INTEREST worked for us. We encouraged our children to save and invest in our mortgage offset account. We paid them interest which was somewhere between the mortgage and a savings account when they wanted their money. We paid off our small house in 6 years. We then put all our extra cash due to no mortgage into savings and super. We bought and sold houses a few times then downsized to a small home and have now retired with a paid home and a comfortable retirement amount.
    We will get no pension if the new super rules become law. Meanwhile all those that didn't scrimp and save will get a full pension. Is that fair?
    particolor
    21st Apr 2015
    7:48pm
    :-(
    MICK
    22nd Apr 2015
    1:49am
    It isn't fair Stof but it is always the same story. I personally think that those who do well from hard work, doing without and saving/investing deserve their rewards. Where I find the current system corrupt is that the superannuation system is a 'casino' set up specifically to benefit the rich whilst expecting the rest of the nation to pay for the scam.
    MacI
    22nd Apr 2015
    9:43am
    Mick - I note that in a couple of your contributions you refer to the superannuation system as a 'casino'. Could you elaborate on how you arrive at this conclusion?
    Radish
    25th Apr 2015
    11:29am
    Stof, if people put as much thought into their retirement years as they do into other pursuits during their working life, a lot of people would be a lot better off when the time comes. I admire what you have done and I begrudge you nothing. I fully understand your comment "is it fair".
    Radish
    22nd Apr 2015
    7:48am
    I believe the figures are correct. To have a comfortable retirement now a married couple need around $58,000 a year.

    A little while ago I said that the income generated for a married couple would only be around what a pensioner couple currently gets and this article bears out what I said.

    I dont know what the comments by Cooper have to do with political gain...he is not a politician. I would tend to believe the comments from a person who is an expert in his field myself.
    MacI
    22nd Apr 2015
    10:33am
    Reading Jeremy Cooper's analysis I smell a vested interest at work. According to ASICs Retirement Calculator a couple retiring at 65 and living until 90 could draw income of $64.1K per annum including part pension from $1M. With no pension included they could draw $41.6K. This is with Super invested conservatively at 5.5% per annum return before fees of 1.1%. If the $1M was invested in cash at 3.7% before fees of 0.5% then they could draw an income of $60.5K including part pension and $34.8K with no pension.

    I'm all for encouraging people to save for their retirement but I reckon this kind of fear mongering sends the average Joe Blow into despair and in effect discourages him from saving - he may as well enjoy life while he has an income because he is destined for a retirement in poverty. Including a Part Pension with a Super balance at 65 of $300K a couple could draw an annual income of $48.4K until age 85 with their Super invested conservatively. $200K will provide an income of $43.5K per annum ($10K above the Aged Pension). These are far more obtainable goals that would encourage more people to save for their retirement.
    Molly
    22nd Apr 2015
    10:56am
    KSS I was so pleased to read your post. I'm a nurse so not well paid and my husband is self employed and has never earnt a lot. We have had a wonderful life bringing up three children paying off a mortgage etc We have had few holidays, I love recycling, I think waste of anything is a crime. Now at 60 I'm ready and proud to retire knowing I'll be financially independent. I don't understand the mentality of expecting a pension. I know people who are working out how to cruise, buy new cars, gift money etc just to get a pension.
    Radish
    23rd Apr 2015
    1:13pm
    Molly, 80% of retirees are full or part pensioners and the other 20% fully self funded. Like you I never wanted to be dependant on anyone at any stage of my life and especially in retirement and I achieved my aim. Yes, I could have bought a more expensive home, yes, I could have blown a lot on cruises etc but I am not an extravagant person and I do what suits me and I holiday where I want and most times they are not expensive holidays at all. Planning ahead for your retirement years is something a lot more should do these days. Compulsory super has been in since 1992 and it would be a good idea as people come closer to retirement to make extra contributions as I do not think the compulsory 9% (I think it is) is sufficient these days.
    Radish
    9th Jul 2016
    2:38pm
    I went on a cruise a few years bac and I would venture to say the majority of Aussies seniors on the cruise were all part pensioners.
    So things are not as bad as many make out.
    Not Senile Yet!
    23rd Apr 2015
    12:04am
    KSS & Molly....you are not getting it at all!!!
    It is not about how much you have acquired...be it a Million or 2 Million in Super....
    It is about the Super allowance of only paying 15% tax instead of the normal rate when you squirrell it into Super being far too Generous!!!
    The average wage earner cannot afford to put in Large amounts whilst paying a mortgage/raising a family etc......and I mean AVERAGE!!!
    Also the current schemes available to Public Servants,Nurses,Police,Judges, and Defence are far too Generous in that allow the amount going into Super to be taken OFF the Gross Salary BEFORE Tax!!!!......which amounts to a tax avoidance for those who can afford to do it!!!
    This is what the subject is about!!!!
    Even the OTHER Party doesn't get it!!! They just want to slug you when you take it out with another tax!!!!
    The HOLE in the BUDGET is created by FAR TOO GENEROUS Tax Avoidance and Super Subsidies allowed by the Government!!!
    Not that there should not be an encouragement to put money into Super....there should be!!!
    But the Current System is far too generous and not sustainable because it is inequitable!!!!
    ALL SUPER including the gains SHOULD be TAX FREE ....the Government should not be taxing any of it!!!
    As for the schemes to avoid paying tax by putting money into Super......They should be removed/stopped!!!
    The Government not taxing your Super.....should be reward enough!!!
    As for the Rules of Super...be it private SMF or Industry or Public Service.....The Rules should be consistently the SAME for Everyone!!!
    Currently the Government has allowed far too many EXEMPTIONS from the Super Rules....especially when it comes to their own Super!!!!!
    CindyLou
    24th Apr 2015
    12:46pm
    Bit puzzled by comment 'schemes available to public servants, nurses...far too generous'.
    Is this is relation to salary sacrificing portion on wage into superannuation. Salary sacrificing can be done by anyone if their employer is agreeable to this arrangement so it is not exclusively for public servant workers. There are other packages that workers can use to reduce tax, ie workers in charitable organizations are able to reduce tax as well.
    KSS
    24th Apr 2015
    1:18pm
    Not Senile Yes! you and Mick are the ones not getting it. So to spell it out for you:

    For people over 49, they can currently make a concessional contribution to super of a MAX $35000 a year. That figure includes the employer contribution - currently at 91/2% of salary. The tax on this concessional contribution is 15% instead of your usual marginal rate. No matter how much you earn you can only have this $35000 in concessional contributions. Most ordinary people would simply not be able to afford to put half or more of their salary into super like this. Most people are putting a few extra dollars in over long periods of time. And by the way if you do the figures, the more you earn, the more your employer contribution and the less of that $35000 you have to make concessional contributions with i.e. your concession amount goes down! On say the average salary of $75000 it amounts to a tax saving of around $4000 tax saving a year if you sacrifice the full amount. $80 a week! With a salary of $150000 the saving is around $3000. Hardly a King's ransom.

    Then there are non-concessional contributions. These contributions are made AFTER tax has already been paid on it. There are NO concessions made on this. This money could be an inheritance, a tax refund, proceeds from selling another asset, or indeed excess salary earnings. There is a maximum $180000 per person (couples $360,000 between them) per year that can be tipped in to super. You can put more in by 'bringing forward future years e.g. a single person could put in say $360.000 but then you could not put more in the following year because you have already used your 'allowance'. If you do put more money in than the cap you are TAXED at 49% of the extra contributions. And by the way you cannot play catch-up for years gone by when you didn't make such a contribution. And of course the older you get the less opportunity you have because you still have to meet the work requirements.

    In all cases currently it is tax free on withdrawal.

    Frankly Not Senile Yet!, there would be so few people with anything like that sort of money to tip into super, I really don't know how much you think is being 'ripped off'.
    KSS
    24th Apr 2015
    1:42pm
    And by the way, the tax savings on concessional contributions go into super, not your pocket.
    San
    24th Apr 2015
    10:27am
    I note the SuperGuru website suggests a single person needs $430,0000 in retirement and a couple $500,000 - and this is based on the ASFA standards. In light of all the information here and what I cannot ascertain with the figures I just stated is if this is at age 60. Because of course, there is a 'spread' of retirement age. Can anyone advise? Many thanks
    KSS
    24th Apr 2015
    1:39pm
    I would suggest this is retirement age 65 as it is now based on when you can apply for the aged pension. Of course people retire 'early' but you would be unable to access your super until you reach the 'preservation age' - for most that would be 60 but others it could be earlier. The earlier that is and the longer you live, the more you would need in super to fund it. $430000 for a single would not last that long or go that far. You have to increase the withdrawal amount as you age!
    MacI
    25th Apr 2015
    6:41am
    San - ASIC have an excellent Retirement Planner on their MoneySmart website. You can play around with all sorts of parameters to project your income in retirement including your current age and age at retirement. You can change factors such as investment return, investment fees. In the 'How it works' section you can even vary the inflation rate, life expectancy, and other factors.
    jackie
    24th Apr 2015
    1:04pm
    Those that have been fortunate in life to own their own home because they worked hard in stable work for most of their lives should be counting their blessings instead of whinging about not ever having enough when they do.
    LiveItUp
    24th Apr 2015
    3:59pm
    I know a person who has worked less than 20 years of their working life in an ordinary job, retired before they were 40 and who has had no inheritance, no lottery wins etc but today they are a totally independent retiree. When asked how they did it the answer was I saved a little of everything I earned.
    Radish
    25th Apr 2015
    8:33am
    Bonny, there are many people who do this. They do not make a song and dance about it. I well remember working for a CEO who was on $200K a year...I am talking 1991. He spent to the hilt, wining, dining travelling etc and I often wonder how he ended up at the end of his working life.

    It is not uncommon to hear of people dying and family finding out that they were multi millionaires.

    http://www.financialjesus.com/income/homeless-man-discovered-to-have-millions-after-dying/
    BobSMSF
    28th Apr 2015
    9:47am
    Rainey forgot the 5th group in our retiree population - those people who've worked smart and hard for 40 years to achieve a healthy nest-egg AND managed to enjoy their lifestyle along the way. We ARE NOT 'privileged' nor have we had an "easy life". It's sad (and offensive) that envious people like Rainey assume the well-off must have been lucky, inherited the money, or behaved unethically. Eventhough you may not be happy with the level of comfort you've achieved in life, you shouldn't begrudge or detract from those of us who came from nothing and succeeded financially and won't be a burden on the pension.
    BobSMSF
    28th Apr 2015
    9:56am
    Kaye , if you read Jeremy Cooper's actual opinion piece you will see that he isn't even saying that one million in super won't buy a pension-size income. He's simple valuing the cost of the pension to the government now, versus previously when the government bond rate was higher. He's actually illustrating that one size won't fit all due to future investment returns being different from the past. He does not factor in the pension because he's placing a value on the pension! Also, why do you think interest rates won't stay low for some time? The past is no predictor of the future - just ask Japan, which has had real interest rates close to zero for around 20 years or more. Finally, super tax concessions are not a 'gift' to the wealthy. They are a break given to the rich (who pay nearly all the tax, by the way) to help them reduce their need to rely on the age pension. It's as simple as that. Please do some research into our 'transfer payment' system, and you will learn that the age pension is an incredibly generous gift to its recipients, merely because they reach the age of 65. It doesn't matter if they've been welfare-dependent their entire lives - they still get a $1m gift from the rest of us. They're the fortunate ones that the rest of us are paying for. Ironically, they don't have to live with their "life choices". The bad decisions they might have made regarding their education, their employment, their lack of saving, their spending aren't sheeted home - we, the taxpayer, pick up the tab to the tune of $33,000 pa for a couple, tax-free.
    BobSMSF
    28th Apr 2015
    6:22pm
    Further to my earlier remark on a low and declining interest rate environment for the forseeable future, the AFR has just published an article saying "Reserve Bank of Australia governor Glenn Stevens has put the nation's growing army of self-funded retirees on notice that the lowest investment yields potentially in human history aren't likely to recover any time soon. In a warning that underscores the downside of the low global interest rates environment and an increasingly desperate search for safe assets, Mr Stevens indicated that poor returns would be an "issue for the longer run".
    Lewi
    3rd Mar 2016
    12:34pm
    pension is so simple every aussie pays 3% from either salary or pension in pension tax than no more meanstest everyone gets the same say 1000 for single 1600 for couples as I said every aussie pays 3% maybe the rich pay somewhat for the poor but that is so in Holland and works good for years
    john
    3rd Jun 2016
    12:37pm
    Not one couple or single are the same. I'd would like to know some people or lots of people who have a million dollars put aside for retirement? I don't believe I know one! I also know people at the near retirement age in the mining industry that don't have nest eggs of 1 million dollars.
    All the educated guesses from economists is useless!
    The educated guess can only come from people who are not very wealthy , which is most of us, and who may have paid off their home.
    And for two to live in reasonable comfort in Australian average middle class society, with their home paid off, it is assumed about 50 thousand a year. And that gets swept away pretty quickly if they would like a holiday O/S .That means about one holiday a lifetime.
    People who travel over seas every year or two, are much more wealthier than my wife and myself. And are not average pensioners or near retirement people, believe me!
    I wonder how many lower income lifestyle people, perhaps working class people there are that get nothing like 50 grand a year.
    Have worked and worked damned hard in low paid employment all their lives and wind up on maybe 33 thousand or less a year.
    Economists and others who can afford to have a coffee at the village shopping centre every morning " on the way to the office" are not the people who see the reality, of real Australian pensioners most of whom get nothing like the life style they should be able to have. And this country has giant business' not paying proper tax.
    And the politicians wonder why they are disliked so much. And Jeremy Cooper has no answer either!
    KB
    30th Dec 2016
    10:31am
    There are many variables and a lot of things can change such change in governments and policies interest rates and health considerations.Also depends on whether you are partnered and single own or rent your home and type of retirement you want


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