Club Plus Super, an industry super fund with one hundred thousand members across Australia, is urging Australians to adequately budget for their retirement in light of modelling that suggests the average retiree may be forced to rely on the Age Pension after only six years of retirement.
According to figures published by the Australian Bureau of Statistics (ABS), the average 65-year-old in 2012 is expected to live until they are 85 years old; however their superannuation is only likely to last until they are approximately 71 when taking into account the average superannuation fund balance for this group.
“While life expectancy is not a topic most Australians would discuss very often, the growing gap between life expectancy and superannuation savings means that many Australians will be forced to rely on the Age Pension to fund their retirement,” said Paul Cahill, CEO of Club Plus Super.
“Living longer is great news providing we prepare ourselves financially for a longer retirement.”
According to a recent report issued by the United Nations, Australia has one of the highest life expectancy rates (at birth) of any country in the world.
Club Plus Super believes that Australians should focus on budgeting for the lifestyle they want to enjoy in retirement and work with their super provider to structure their contributions towards this goal.
The fund believes this approach will be more effective in the long run than aiming for an arbitrary figure such as one million dollars.
“A comfortable retirement can be surprisingly expensive with a single person needing payments of around $41,830 annually for upwards of 20 years if they retire at 65 years of age – that is $20,325 more per year than the Age Pension currently provides,” continued Paul Cahill.
“By making small additional contributions to super now, Australians can make a huge difference to their quality of life during retirement,” concluded Paul Cahill.
Assuming the average super fund balance for females is $112,632 and for males is $198,325 at the age of retirement (Association of Superannuation Funds of Australia (ASFA) 2011, Developments in the level and distribution of retirement savings) their superannuation may only last four and eight years respectively.
This assumes the average retiree spends $41,830 annually to maintain a comfortable level of retirement as per ASFA’s retirement standards and is able to receive the maximum pension payments.
Figures used are an approximation and circumstances vary for each individual depending on a variety of factors.