Your transition to retirement can be made much easier with some forward planning. Dealing with financial assets like superannuation, annuities, asset returns, and pension accounts are all important factors to consider in your financial forecasting.

Australians are living longer and healthier lives than ever before1, so when it comes to planning for retirement, making sure you have enough money to cover your future needs is critical. Inflation, unexpected health issues, and other unpredicted events can all affect your savings in your retirement years.

What is superannuation, why is it important, and who gets it?

In Australia, superannuation allows you to invest a portion of your employment income in a range of assets to build wealth before retirement. Any returns earned by your superannuation investments are taxed at a concessional rate, which is usually around 15%.

Superannuation can give you peace of mind knowing you will be financially supported when you’re no longer working. The weekly living cost for a retired couple is $1,154, with singles needing $819 to live comfortably2. This means that you need to ensure your super balance will be able to support you throughout retirement.

While a person is working within Australia, they will be making regular payments into their super fund, and this investment will grow until retirement. This applies to anyone aged over 18, earning at least $450 before tax per month. This then provides a future source of income once you retire and could be used to supplement any eligible Age Pension available.

What is the Super Guarantee (SG)?

The Australian Government has legislated that employers must make a mandatory contribution of at least 9.5 per cent to their employees’ super fund, known as the Super Guarantee (SG).3 This contribution can be paid quarterly or more frequently and is calculated based on ordinary time earnings.

The amount employers have to contribute has changed over time. The Superannuation Guarantee rate will remain at 9.5% for another 3 years (until 30 June 2021), increasing to 10% from July 2021, and eventually increasing to 12% from July 2025, further changes are planned for the future.

In most cases, an employee will pay superannuation if they earn $450 or more per calendar month and work over 30 hours in the same period.

Workforce participation of older Australians

Australians are now working into their 60s, 70s and beyond.4 13 per cent of Australians aged 65 and over are still active in the workforce, up from 8 per cent in 2006.

According to the Australia Bureau of Statistics (ABS), in 2004 only 8 per cent of Australians over 45 planned to work until they were 70. However, Australians are now citing financial security (38 per cent) and personal health or physical abilities (21 per cent) as the most common factors influencing the decision to retire at 70 or later.

In fact, the ABS said that of the 3.6 million people who were recently retired, more than half were aged 70 years and over.

The earlier you start preparing for retirement, the more options you have to set a course that suits you. The current Age Pension age is set at 65½ years in Australia and will rise to age 67 by the year 2023. If current government proposals are accepted, the Age Pension age will rise to age 70 by the year 2035. 5

How much money do you need for retirement?

The Australian Securities and Investments Commission (ASIC) has a guide for those retiring at age 65, with an average life expectancy of 85 and who own their home.6 For couples wanting a comfortable life, ASIC suggests annual living costs will be $60,264 (or $1,154 a week), whereas a modest retirement could be had for just $39,353 a year (or $754 a week). Singles can expect to fork out $42,764 per year for a comfortable retirement or $27,368 per year for a modest one.

ASIC estimates the lump sum needed to support a comfortable lifestyle for a couple is $640,000, or $545,000 for a single person, assuming a partial age pension. This means that average income earners will need 67% of their current income in retirement in order to maintain the same standard of living.

Make sure you factor in legislative changes

Government policy on superannuation is constantly evolving, although changes to legislation are usually rolled out gradually, allowing you to adjust your fund management and portfolio. This is another reason it’s so important to plan carefully by taking into account your future goals and the size of your savings. Changes to legislation are usually rolled out gradually, allowing you to adjust your fund management and portfolio.

  1. Life expectancy hits a new high – Australian Bureau of Statistics
  2. ASFA Retirement Standard, Detailed budget breakdown – The Association of Superannuation Funds of Australia
  3. Superannuating rates and thresholds – Australian Tax Office
  4. Older Australians at a Glance 2019 – Australian Institute of Health and Welfare
  5. Age Pension age rules – Australian Government of Department of Human Services
  6. ASIC and older Australians – Australian Securities and Investments Commission

Register your interest

Whether you’re planning to retire early or work late, it’s important to keep up with potential changes and best practices for your super. Register your interest now to find out more about Australian Seniors retirement solutions, which can help you secure the future you’ve been planning for.