There are a number of factors that could significantly impact the road to retirement for Australians in the coming years. It’s important to identify the trends that may impact your own journey of post work / life, to ensure the transition to that next stage in life is as smooth as possible for you.
Being aware of the following may help you consider how much money you may need in your super to be ‘comfortable’ in retirement.
Increases in life expectancy
Life expectancy for both males and females is continuing to increase, due to many factors including healthier lifestyles and medical advancements. This means that we’re likely to be spending more time in retirement than ever before.
Women who are currently 65 are expected to live until they are 87.6 and a man is expected to live until they’re 84.9i. You’ll need to consider your age when you retire and how comfortably you want to live after you stop working. Thinking about this now will give you a high-level understanding of how much money you may need in to have accumulated in super when you retire.
The Association of Super Funds (ASFA) provides a good indication on how much money you will need to have in your super in order to live at either a comfortable or modest level. This can be found here>>>.
Increased health and aged care costs
Health and aged care costs are growing significantly, due to higher standards of care and the fact that longer life expectancy means an individual may need care for a longer period of time.
More and more people are entering aged care, and while the government helps out, this can be an expensive outlay with many facilities requiring a lump sum payment up front to secure a room.
Increases to the age pension eligibility age
With the increase in life expectancy comes the increased pressure on the pension system in Australia. Depending on your date of birth, the age of those eligible to receive the age pension increased by six months from 66 to 66 and a half months from 1 July, 2021 and will increase again to 67 on July 1, 2023.
It’s likely as more and more Australians enter retirement, stricter income and assets tests could be introduced for those wanting to access the (full or part) pension and thus it’s important to plan and self-fund your retirement where possible.
Gender inequity in super
Women currently enter retirement with an average 47 per cent of what men retire on and are expected to live around three years longerii. There are reasons why this is the case including the gender wage gap, women taking an average of five years out of their working life to care for children or family members and a larger proportion of women work part-time. While there is hope that this gender super gap will decrease, it’s something you need to be aware of. It’s also worth knowing that even contributing small amounts to your super now could potentially have a positive impact on your account balance in the future.
Decrease in home ownership
We all know it’s generally not cheap to purchase a home and according to the ABC, there are more and more Australians entering retirement, still paying off their mortgage or as renters. It‘s essential that if you’re renting or still paying off your mortgage, that you factor in the cost of continuing to pay off your mortgage (whether by a lump sum out of your super or progressively) or renting in your day-to-day retirement living expenses. Long term planning will help you effectively assess how you can enter retirement, with a level of comfort, even if you don’t fully own your home.
Increases in super from your employer
The Government has recognised the above factors will mean Australians will need to have more in their superannuation moving forward. As a result, they’re increasing the compulsory super your employer has to pay you by 0.5 per cent from 1 July 2023 to 11 per cent. While this increase may seem small, it has the potential to have a big impact on your retirement account balance in the long run.
It is important that you remain aware of the above factors and continue to research any other emerging trends, to ensure that you are well prepared to transition into a comfortable retirement when you want to.
If you need help, it’s always good to ask for it. A financial planner can help you review your current situation and provide you with options. If you don’t have a financial planner, reach out to the Financial Planning Association who as an independent body, can help put you in contact with one.
i https://www.aihw.gov.au/reports/life-expectancy-death/deaths-in-australia/contents/life-expectancy
ii https://www.womeninsuper.com.au/content/the-facts-about-women-and-super/gjumzs
There are a number of factors that could significantly impact the road to retirement for Australians in the coming years. It’s important to identify the trends that may impact your own journey of post work / life, to ensure the transition to that next stage in life is as smooth as possible for you.
Being aware of the following may help you consider how much money you may need in your super to be ‘comfortable’ in retirement.
Increases in life expectancy
Life expectancy for both males and females is continuing to increase, due to many factors including healthier lifestyles and medical advancements. This means that we’re likely to be spending more time in retirement than ever before.
Women who are currently 65 are expected to live until they are 87.6 and a man is expected to live until they’re 84.9i. You’ll need to consider your age when you retire and how comfortably you want to live after you stop working. Thinking about this now will give you a high-level understanding of how much money you may need in to have accumulated in super when you retire.
The Association of Super Funds (ASFA) provides a good indication on how much money you will need to have in your super in order to live at either a comfortable or modest level. This can be found here>>>.
Increased health and aged care costs
Health and aged care costs are growing significantly, due to higher standards of care and the fact that longer life expectancy means an individual may need care for a longer period of time.
More and more people are entering aged care, and while the government helps out, this can be an expensive outlay with many facilities requiring a lump sum payment up front to secure a room.
Increases to the age pension eligibility age
With the increase in life expectancy comes the increased pressure on the pension system in Australia. Depending on your date of birth, the age of those eligible to receive the age pension increased by six months from 66 to 66 and a half months from 1 July, 2021 and will increase again to 67 on July 1, 2023.
It’s likely as more and more Australians enter retirement, stricter income and assets tests could be introduced for those wanting to access the (full or part) pension and thus it’s important to plan and self-fund your retirement where possible.
Gender inequity in super
Women currently enter retirement with an average 47 per cent of what men retire on and are expected to live around three years longerii. There are reasons why this is the case including the gender wage gap, women taking an average of five years out of their working life to care for children or family members and a larger proportion of women work part-time. While there is hope that this gender super gap will decrease, it’s something you need to be aware of. It’s also worth knowing that even contributing small amounts to your super now could potentially have a positive impact on your account balance in the future.
Decrease in home ownership
We all know it’s generally not cheap to purchase a home and according to the ABC, there are more and more Australians entering retirement, still paying off their mortgage or as renters. It‘s essential that if you’re renting or still paying off your mortgage, that you factor in the cost of continuing to pay off your mortgage (whether by a lump sum out of your super or progressively) or renting in your day-to-day retirement living expenses. Long term planning will help you effectively assess how you can enter retirement, with a level of comfort, even if you don’t fully own your home.
Increases in super from your employer
The Government has recognised the above factors will mean Australians will need to have more in their superannuation moving forward. As a result, they’re increasing the compulsory super your employer has to pay you by 0.5 per cent from 1 July 2023 to 11 per cent. While this increase may seem small, it has the potential to have a big impact on your retirement account balance in the long run.
It is important that you remain aware of the above factors and continue to research any other emerging trends, to ensure that you are well prepared to transition into a comfortable retirement when you want to.
If you need help, it’s always good to ask for it. A financial planner can help you review your current situation and provide you with options. If you don’t have a financial planner, reach out to the Financial Planning Association who as an independent body, can help put you in contact with one.
i https://www.aihw.gov.au/reports/life-expectancy-death/deaths-in-australia/contents/life-expectancy
ii https://www.womeninsuper.com.au/content/the-facts-about-women-and-super/gjumzs