Many Australians are not confident they have enough assets to support their retirement, according to research from IPSOS and MLC, the Australia Today report, with 43% saying they will need to rely on support from the Australian Government.
Among lower income earners, (social grade DE, with annual household income of $33,000), 62% agreed they would rely on the government in their retirement. For social grade C2 (those with $55,000 in household income) 54% will rely on the government in retirement.
The expectation of government support doesn’t stop at the lower income earners. Even among those in social grade A, the highest grade earning $144,000 household income per year, almost one-third plan to rely, to some extent, on the government in retirement.
Will the age pension apply to me and will it be enough?
So what’s the reality of relying on the government to fund your retirement? There are different rates of Age Pension payments for single people and couples. Your rate also depends on your income, assets, and other circumstances and you should seek further information from the Australian Department of Human Services government website.* If you were born after 1957, you will need to turn 67 before you are eligible for the aged pension.
However, the maximum basic rate for a single person living alone is $788.40 per fortnight and for a couple is $594.30 each. Assets are also taken into account, among other factors, excluding the primary home and income is also taken into account. For example, if you’re single and earn up to $162 per fortnight via a annuity or other source, you still receive the full pension payment, however if you earn more than $162 per fortnight, your pension payment is 50 cents for every dollar you earn over $162.*
Many of us will work longer – but the upside is staying connected
With the pension age extending, many of us will have to work longer if we want to maintain our lifestyle well into retirement and while for some that’s a concern, for other baby boomers the prospect of working longer provides an opportunity to stay connected with the community.
Laura Demasi from IPSOS Research comments: “Many are talking about delaying retirement because they don’t have enough super, but people are divided on the issue of working longer. Some people are horrified at the idea of having to work until you’re 70 – there’s a perception that employees will take only younger workers, and people working in physical jobs are concerned. On the other side, some people like the social engagement and intellectual stimulation of working, so we’re seeing the concept of ‘partial retirement’ emerging. Boomers are less likely to want to disappear into irrelevance and they are less likely than their parents to want to step into old age.”
More retirement savings mean more options
So, what’s the point of saving and topping up super when it means your pension is reduced? Well, quite simply, when you have retirement savings you have more “influence over the way you live, how much you spend, particularly in the first decade (or two) of retirement, before your super savings diminish. You have far more flexibility and lifestyle options if you focus on maximising your retirement savings and if your view of the government pension is as a backup, for when those funds run out or if you live longer than expected.
A little help can go a long way
The good news is, there’s help out there – and it makes a difference. The research shows that those who engage the help of a financial planner or adviser were significantly less likely to be planning on government support in retirement (27%) compared with 43% of those who do not employ a financial professional.
What can you do?
Talk to your bank manager, your accountant or financial planner about how you can pay off your mortgage sooner using current income, and take advantage of super top-up opportunities at tax time.
Every year you work can make can make a big difference to your retirement savings and lifestyle. You may consider up-skilling or embarking on a new career that gives you more flexibility or is less physically demanding for your later years.
Read more articles in the Australia today series: