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eStatements
The Age Pension is intended to be a safety net provided by the government to support Australians who can’t sustain their retirement years alone. It is paid to people who meet age and residency requirements and is designed to be targeted, through a means test, to those who need it most.
The Age Pension is the most common income support payment available for people aged 65 and over. As at March 2021, around 2.6 million people received Age Pension, equating to over 3 in 5 (62%) of the population aged 65 and over1.
Why aren’t we planning properly for our golden years?
There are a lot of reasons why people may need to rely upon the Age Pension in whole or part to fund their retirement. One of the bigger ones is that superannuation has only been compulsory since 1992, so a significant proportion of the current retiree population may not have had super for much, if any, of their working lives.
Additionally, superannuation may not be enough to support a person in retirement alone. According to the Association of Superannuation Funds of Australia (ASFA), the median balance for those aged 60 to 64 was around $178,800 for males and $137,050 for females2. According to ASFA, these amounts are well short of the $540,000 balance needed for a single person to achieve a comfortable retirement based on retiring at age 67.
Thirdly, there is a proportion of retirees in Australia who have been forced into retirement early due to illness or injury, where they are often in limbo until they reach Age Pension age. The Australian Government’s Retirement Income Review revealed that around 28% of retirees are in this position. The report also suggests that those who don’t own their own home and are paying rent in retirement are also disadvantaged. This can be either due to higher financial stress or a lower pension.
What can you do?
It’s not a bad thing to include the Age Pension in your retirement plan. But it should typically only make up one element of your plan, such as a backup source of income.
Retirement planning is a complex area, and everyone’s situation is different. It’s a good idea to seek out the advice of a financial planner, who can help you determine when you want to retire, how you want to spend your retirement, so that you can figure out what you need to do financially in order to get there. This could include things like making personal contributions to boost your super balance, building an emergency fund or nest egg, or ensuring you have adequate income and TPD insurance.
So, whether you want to spend your golden years travelling around in a caravan, or just spend more time with the grandkids, you’re more likely to be able to achieve your retirement dreams if you start planning now!
References
- Australian Institute of Health and Welfare, Australia’s Welfare Snapshot 2021, https://www.aihw.gov.au/reports/australias-welfare/age-pension (latest statistics at time of writing).↩︎
- ASFA, Developments in account balances: Superannuation account balances for various demographic groups, March 2022, https://www.superannuation.asn.au/ArticleDocuments/270/2022_Superannuation_Account_Balances_Research.pdf.aspx↩︎
General advice disclaimer
The information contained in this document is provided for education purposes only. It has been prepared without taking into account your particular financial needs, circumstances or objectives. You should consider the appropriateness of the information as it relates to you. You may wish to consult an adviser before you make any decisions relating to your financial affairs.
