There have been whispers since last year about the government considering allowing young Aussies accessibility to their superannuation in order to fund their first home purchases. I released a breath I didn’t know I was holding last night, when I read Andrew Robertson’s online article on ABC News confirming that this was not going ahead. And thank goodness for that. Sayonara to retirement if it was.
In a nutshell, Robertson’s article tells us:
- The Treasurer has kiboshed the idea because the sole purpose of super is to fund your retirement – that’s it.
Fun fact: Legislation was created years ago that prevents anyone from using their super for any means other than to save for their retirement (except in life-threatening and destitute situations but satisfying those requirements is made purposefully difficult). If you are interested, it is called the Sole Purpose Test and it is located in the SIS Act (Superannuation Industry Supervision Act 1993).
- Without super, you and I won’t be able to fund a comfortable retirement lifestyle, unless you are currently incredibly wealthy, or you become incredibly wealthy between now and then. Robertson uses the following facts to point this out:
- A ‘comfortable’ retirement for a couple costs $54,000 pa, for a single it’s $39,000 pa (this is to fund living costs, entertainment and travel – it does not include any other obligations such as debt repayments, so beef that up if you don’t plan on being debt free in retirement).
- The Age Pension currently pays $34,000 pa for a couple and $23,000 pa for a single, and that’s if you qualify for the full amount. More than likely you will get a partial payment, as the government keeps changing the cut-off limits, making it more difficult to satisfy the requirements to receive the full amount.
A bit of foresight for you: the government is ‘phasing out’ the Age Pension – when I am ready to retire, it will not be there for me. Don’t get me wrong, there will probably be some level of social security, but the eligibility to access it will be so limited that I may as well prepare for it to be gone altogether.
- Robertson has also worked out what $54,000 pa in retirement income means for you at the start of your retirement. If it’s meant to last for as long as most people will be alive in retirement (based on life expectancy) you need $1,080,000 inside super at the start of your retirement (in today’s dollars).
As an afterthought and out of curiosity, I did some research and an analysis of the average person’s situation and compared it to my own. At this rate, I will be ok, as will most other 27 year old’s, because we have the benefit of time and compound interest on our side, except when you consider those that are likely to take time off work to raise a family, and in this day and age, it isn’t always the women doing this.
Considering the figures from Robertson’s article and in today’s dollars, my analysis showed that I am 24% better off at the start of retirement compared to the average person of the same age, and that is assuming there is no difference in our salaries or retirement ages; it only shows the value of the super strategies that I have utilised for myself, whereas most people are not aware or do not take advantage of them.
I also factored my own career breaks into the analysis, should that become relevant to me, and yet even in that scenario, I’m still on par with the average person who won’t take a career break, and I’m 56% better off than those that will eventually become house wives or house husbands. I almost dropped my pencil. That is ridiculous to me.
I felt several things about that analysis: relief that I will be ok, grateful that I have choices, and thankful that I practice what I preach. Then I felt concern. It’s all very well and good for me and my rosy picture, but what about the people in my generation who will be raising our children? They are at risk of not having enough at retirement and they might not even know it, especially when you consider the financial impact of things like divorce… I know, I know, it won’t happen to you, but it will keep happening (statistics people, lets’ be real about this: 1 in 3 currently don’t make it). Life is a numbers game, sometimes it does happen to you, and sometimes it happens to you twice. You get the gist.
Bottom line: do you know where you stand? Do you know what you can do about it? And most importantly, WILL you do something about it? If you would like to discuss further, please don’t hesitate to contact me 0433 313 099 or email@example.com. I welcome any opportunity to help those who want to help themselves.
If this at least gets you thinking about your future, then you are already in a better position than you were 10 minutes ago, and I’ve done my job. But for your own sake, make sure you do something about it, too. Awareness isn’t enough.
“Many receive advice, only the wise profit from it” – Publilius Syrus.
Don’t be the many, be the wise.
If you are interested in reading the full article by Robertson, click the link below: