The Government recently published its Intergenerational Report which addresses how Australia’s population will grow and change over the next 40 years. It particularly reflects the need for greater attention to retirement planning as we will earn more, live longer and have a longer retirement. Concurrently taxes are likely to increase and social benefits will become harder to obtain. Today Australians should be engaging with superannuation savings, as for many of us, this could determine the difference between a comfortable or a modest lifestyle in our retirement.
Australians will live longer.
Male life expectancy is projected to increase from 91.5 years to 95.1 years in 2055, and female life expectancy is expected to increase from 93.6 years to 96.6 years. The number of Australians aged 65 and over is projected to more than double by 2055 compared with today. In turn we will experience a longer retirement. Latest figures from The Association of Superannuation Funds of Australia (ASFA) details what singles and couples would need to spend to support their chosen lifestyle. To lead a ‘comfortable’ lifestyle in retirement, you will need to save $430,000 in superannuation and as a couple at age 65, you will need to save $510,000 in superannuation.* The earlier we start saving for retirement, the better. We need to recognise how much money we need to save each week so we can achieve our lifestyle goals in retirement. The tables below illustrate superannuation balances needed at age 65 to achieve a comfortable retirement and a modest retirement.
Our labour force participation will be longer.
Changes to the age at which people become eligible for the Age Pension have affected the total participation rate. The Age Pension eligibility age will increase from 65 to 70 years and projections show the participation rate of the over 65 age bracket will increase from today’s 12.9 per cent to 17.3 per cent by 2055. Longer labour force participation will see more Australians receiving compulsory superannuation contributions for longer periods of their working lives. This results in retiring with higher superannuation balances. Though a higher balance is good news, we will live longer and thus have a longer retirement to save for.
Uncertain policy on Age Pension and super tax.
Budgetary pressures could see higher tax rates on superannuation in the future and accentuates the importance that people take control of their superannuation. The current Government appears to be sending mixes policy signals over the Age Pension eligibility and superannuation tax concessions. Given the changes to the Age Pension eligibility age and the likelihood of tougher asset tests, people will need to save more if they wish to achieve a comfortable retirement. We should look to put money away now if you can afford to, but people can also save on costs by consolidating super funds and changing insurance coverage to suit personal circumstances.
People who have spent their working lives contributing to superannuation deserve certainty. We must encourage all Australians to actively engage with their retirement savings and take control of improving their own living standards in the future.
The message is simple: consolidate super funds, be wise with choice of investment and implement a solid retirement plan. Super is for life.
Empower your employees to make informed decisions about their superannuation by providing them with valuable tools and education.
*ASFA Retirement Standard – https://www.superannuation.asn.au/resources/retirement-standard
Intergenerational Report 2015
ASFA Retirement Standard