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Does Australia Have A Self-Funded Retirement Issue?

Updated: May 20, 2022

Did you know that only 2.3 out of 10 retired Australians, aged 65 and over, are able to fund a comfortable retirement?

If your answer was no, neither did we!

Whether it's surprising or not, the figures further demonstrated that 15% were still working as they simply couldn't afford to retire. The remaining 62% were surviving off the tax-funded aged pension. This poses an important question....

Does Australia have a self-funded retirement issue?

Wealth creation is something that we all strive to achieve. We've been told from an early age that we must create wealth to support ourselves during retirement. Though, these figures show that something doesn't quite add up. The fact that only 23% of Australians aged 65 and over are living a comfortable self-funded retirement poses an issue.

Let's explore the Government Age Pension

Some may argue that surviving off the Government Aged Pension doesn't sound too bad. It's the idea of receiving an income without having to do anything for it that appeals to most. Though, what if we told you that this pension only provides you with half of what you need to live a comfortable life when you retire?

The Government Aged Pension is only half of what's needed to live a comfortable lifestyle
The Government Aged Pension is only half of what's needed to live a comfortable lifestyle

The aged pension is basically enough to just cover your expenses. So, if you rely off this once you retire, you can say goodbye to smashed avo on toast and rewarding yourself with extravagant holidays. You know what we're talking about: the holidays that you dream about while you're working hard and creating an earned income.

We revised some figures from the Australian Super website on the Government Aged Pension. If you're a single retiree, the maximum benefit that you can expect to receive from the Australian Government is $22,375 per year. Now, if you want to live a comfortable lifestyle, you would need around $44,000 per year. The maximum benefit that you can expect to receive if you're a couple is $33,732, and that's close to half of what's required to live a comfortable life ($62,000 approx.).

What about Superannuation?

Did you know that the average superannuation balance for an Australian male aged 65 and over is $384,000 and $313,000 if you're a female?

In 2021, this is highly disturbing. Superannuation was created as a means to fund your retirement. Though, many people aren't truly aware of how much is actually needed to live off, especially with the average life expectancy increasing. According to Australian Super, the average life expectancy ranges between 82 to 95. The Australian Institute of Health and Welfare predicts it will increase to 100 in coming years. So, let's say you want to retire at 65; you will want to have around 30 years of savings to live comfortably off.

For purpose sake, you have a lifestyle that requires $50,000 a year. Multiply that by 30 - your superannuation balance will only get you through 7.5 years. Yikes!!!

This brings us back to our original question - does Australia have a self-funded retirement issue?

These figures demonstrate some disturbing issues. There's a lot of assumptions and misunderstanding around financial knowledge. Reasonably, everyone's circumstances are different and being financial specialists, we get that!

Though, these figures do pose a concern for the financial future of many Australians. Especially if we're expected to live longer. We believe that more Australians lack basic financial literacy. We also believe they need to be seeking solutions that can help them on their pursuit to wealth creation.

REIF are on a mission to do just that. Our finance specialists and wealth creation experts are assisting clients who've identified a need to do something to protect their financial independence in the lead up to and once they reach retirement.

We strongly advocate the importance of creating multiple streams of passive income. Especially while you're still earning earnt income.

Due to the stability that property investment provides, we work with our clients in analysing their current financial circumstances. We then look at their current assets and see how we can leverage them to start buying an investment property.

With our specialised formula many of our clients are lucky enough to make $10,000, upwards on each property, every year! In fact, we recommend checking out some of these case studies to see how we are able to assist clients with being able to accomplish that.

The REIF solution

There's truly no greater investment, than an investment in your future! We need to identify smarter ways to support a comfortable self-funded retirement. It all starts with reaching out to those who know what they're doing. With close to 100 years of combined industry knowledge, our finance specialists and wealth creation experts can help you map that out. If this is something that you would like to pursue, please click to book an appointment or arrange a free consultation over the phone.

Ph: 1300 130 932

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