For many years Australians have believed the government pension and superannuation, will take care of us financially at retirement. After a lifetime of working hard and paying taxes, we could easily make this assumption.
With medical advancements and better nutrition, people are living longer. We are also experiencing a time, when the cost of living far exceeds our income levels. This means the government pension and our meagre super balance will not be enough money to cover everyday expenses for a long period of time.
A closer look at the Government Pension
According to ASIC, 65% of older Australians rely on the Government Pension as their sole source of income at retirement. The qualifying age for an aged pension has now increased above age 60, so that anyone born after 1949 can retire at 65, whilst anyone born after 1957 cannot retire until 67.
The maximum rate for a pension is currently $826.20 per fortnight for a single person and $622.80 per fortnight for each person in a couple. How much of the maximum rate you receive, is determined by the value of your assets. If your assets are worth less than $250,000, you are entitled to the maximum rate. However, if your assets are worth more than $250,000, your pension will be decreased by $3 for each $1,000 over that figure.
Assets include savings, share dividends, superannuation balance, property investments, car, boat, caravans, household contents and employment income. If you continue to work casually throughout retirement, you can earn up to $168 per fortnight without penalty.
Superannuation can supplement the pension
Australians currently require $600 per week, to pay for a basic standard of living. That’s $200 more than the aged pension provides a single person. Having a casual job during retirement, will only add another $84 per week. This is where superannuation picks up the short fall.
Superannuation only became compulsory in 1992. If you were fortunate enough to have a trade union arrangement before that time, you might have enough saved for retirement. For anyone else retiring today, you might have a superannuation fund balance of around $200,000 – if you worked full-time. That’s income for 6.5 years, at a basic standard of living.
When we say ‘basic standard of living’, we mean living on a tight budget, no holidays or excessive spending. A comfortable life actually requires $800 per week, with a superannuation balance of $500,000 and a part pension.
Alternative ways to generate income for retirement
Instead of sacrificing your hard earned wage, look for alternative ways to increase your super fund balance. Find investments which provide both capital gains and a regular income, to reduce your reliance on your superannuation. In case you haven’t heard – 60 is the new middle age! Don’t rely on the government pension to support your retirement, you deserve better than that.
At JR Prosperity Partners, we believe property is the best asset class to generate an income well into retirement. We specialise in helping investors achieve financial freedom now and in future. Contact us today on 1300 522 562.
