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Will you outlive your retirement savings?

Have you ever considered that you might outlive your retirement savings?

Studies conducted by the World Economic Forum have found that many Australians will have only saved up enough in their superannuation to last 10 years – but are living at least 20 years beyond retirement. If you are one of the many Australians who has not considered this issue, now is the time to start planning.

A Little Pension History

Government funded retirement pensions date back to 1909 when it was paid to men from the age of 65 and to women (from 1910) from the age of 60. Paying pensioners a living income was not a burden in a time when only 4% of the population was expected to live past 65.

Today, Australian women are expected to live to 85 and men to 80. The jump in our life expectancy now represents a potential problem for a budget-savvy government. Knowing that life expectancy is only going to increase, it is safe to assume that the government will:

  • increase the retirement age and
  • make accessing pension funds more difficult.

Australia’s Aging Population

 Australia is a country with an aging population. We have made great medical advances and have a keen awareness of the importance of keeping fit and healthy. Australians are now equipped to keep ourselves living longer than ever before.

The Age Pension age is 65½ and it rises in stages to 67 in July 2023. If current Government proposals are accepted, the Age Pension age will be 70 by 2035.

 

“Will you have enough money to support yourself comfortably for 20 more years or will you, like many Australians, outlive your retirement savings?”

 

Statistically speaking, if you are a 65-year-old woman today, you can expect to be able to retire now and live for at least another 20 years. Given how difficult it is becoming to have access to the full Age Pension, will you have enough money to support yourself comfortably for 20 more years, or will you, like many Australians, outlive your retirement savings?

Australia’s aging population has placed unsustainable pressure on government and employer-sponsored pension systems. This pressure has led to a growing trend for individuals to take responsibility for financing their own retirement.

Funding Your Own Retirement

It is no longer practicable to assume the Age Pension will support your retirement comfortably. A study conducted by National Seniors Australia found that:

  • 28% of Australian retirees regret not contributing more money to retirement
  • 31% said contributing more was not an option; and
  • Worrying about outliving savings and investments was more likely for women, for those in poorer health and with less savings.

It is important for every Australian to build their own retirement fund as much as possible if it doesn’t impede their living today. As people are living longer, they must make sure they have enough retirement savings to last them through their longer lives. Making the decision to start planning for your retirement needs to start as early as possible.

How To Ensure You Don’t Outlive Your Retirement Savings

 Having enough money to retire comfortably requires forethought – the sooner the better. Some ways you can start to boost your retirement savings are:

Contribute more to your superannuation fund.

Whether you have a Self-Managed Super Fund or an industry super fund, your employers are required to pay 9.5% of your income directly into your super account. Contributing extra into that account will go a long way to boosting your retirement savings.

Pay off your mortgage.

If a third of your income is going towards paying off your mortgage, your budget is going to be tight. Pay off your mortgage as soon as possible so that you can go into retirement as debt-free as possible.

Understand your finances.

Understanding how much you spend every year will mean you can plan how much money you will need to save to comfortably retire. Make sure you know how much you will need to pay bills, how much your living expenses cost you every year and plan your retirement budget accordingly.

Consider passive income.

Passive income is income received on a regular basis where minimal effort by the recipient is required to maintain it. Investments are the most popular form of passive income and the returns paid can provide enough income to retire comfortably.

Property Investment in Melbourne

It’s no secret – here at Safe Super Homes we advocate ONLY property investment. It is by far a safer option than risking your retirement money on the share market. People will always need a place to live and our properties are highly sought after by tenants.

 

“It’s never too early to start having a conversation about retirement planning.”

 

Closing the savings gap requires your input – you can’t rely on the government to pay a living pension anymore. Statistically speaking you can expect to live 20 years past retirement; make plans now to ensure your golden years are comfortable.

If you need advice on creating wealth for your retirement, come and see us in our office in Berwick. It’s never too early to start having a conversation about retirement planning.