Retirement…. have you thought about it?

calendar September 17 2018
Planning a single retirement?

A 2017 report found that 52% of people aged between 25 and 64 can expect a ‘comfortable retirement’. On the flip side that leaves of 47% of us (or 5.1 million people) unlikely to have enough put aside to live comfortably in our retirement years.

However, the story it tells for single people is even more disturbing with claims that only 22% of single women and 31% of single men can expect a comfortable retirement.

What is ‘comfortable’?

In 2017 the superannuation balance required for a comfortable retirement was estimated at $640,000 for a couple and $545,000 for singles. This figure assumes the retiree(s) will draw down all their capital and receive a partial age pension.

Based on 2016 figures the average superannuation balance for a women at retirement is $231,000 for men it is still $454,000 – still significantly short of the required threshold. You can see why singles, particularly women, may find retirement more financially challenging than others!

Is the age pension important?

The answer? VERY. Without it, only 20% of couples, 17% of single males and 9% of single females could afford a comfortable retirement. As our policy makers struggle with the costs of supporting both present and future ageing populations, what will happen to the age pension? A heavy reliance on the pension may be to your disadvantage.

Of course to compulsory super guarantee contributions, people expected that retirement meant leaving on the pension. So what has changed? We are:

  • Living long – with women on average living longer than men.
  • Healthier and therefore more active. Longevity and good health have created a ‘new vision’ of our retirement lifestyles.
  • Retirement ‘risk’ factors…

    Lower super balances are certainly a risk for single women. The imbalance between men and women is usually due to factors such as lower incomes, time out of the workforce caring for families and part time work.

    Renters will need more retirement savings to cover the cost of rent. A female retiree may also be paying rent for longer.

    Divorce after 50. Divorce at any age can set you back financially but the older you are the less time you have to replace what was lost in the division of assets. This can significantly impact a previously well planned retirement.

    Financial goals

    If you’re building your retirement nest egg on a single income and making financial decisions solo the following tips may help:

  • Become financially confident. Educate yourself about finances. Know what assets and liabilities you have ad plans for your future goals. Having goals helps you make better financial decisions.
  • Manage your debt. Spiraling debt can derail your financial goals. If debt becomes a problem take action to get back on track sooner rather than later. Don’t be embarrassed – just ask us how!
  • Learn about investing. You don’t need a lot of money to invest. Consider starting small and add to your investments over time.
  • Boost your super. Consider making extra super contributions such as salary sacrifice. Seek advice from your accountant and financial planner first.
  • Think you are too young to worry?

    You may think you don’t need to worry yet. However with advances in medical technology it is predicted younger generations will live even longer than baby boomers.

    They should also have the benefit of a lifetime of super contributions to boost retirement balances. But did you know the Australian government recently passed a law that will delay the introduction of the 12% super guarantee until July 2025? That’s 7 years later than the date set in our previous laws! Who knows if it will change again?

    Planning is the key

    Whether you are a couple, single, males or female the question is: will your super balance be enough in retirement? If the current generation is any guide – probably not.

    *EBA/Rice Warner Retire Ready Index
    * Retirement Standard Summary. Assumes retiree(s) own their home mortgage free and are in good health.
    *ABS, Feb 2016, Economic Security 6151

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