Many retirees are surprised by the cost of living when they finish work.
Many retirees are surprised by the cost of living when they finish work.

The big worry for Aussie retirees

Almost half of Australians aged over 65 say retirement is costing them more than they expected.

More than 50 per cent worry that they will outlive their savings, and four out of 10 say they can't afford to go to restaurants and cafes.

This sobering picture of retirement finances is uncovered in a new study by the Australian Institute of Superannuation Trustees and suggests more should be done to help seniors feel financially comfortable.

AIST CEO Eva Scheerlinck said Australia had a good retirement system but it was letting down some people, partly because it was not yet mature.

"I don't think people think about retirement enough until they get to it," she said.

"The super guarantee for people retiring today hasn't been there their entire working lives, and even when it became compulsory people were only getting 3 per cent."

Australian Institute of Superannuation Trustees CEO Eva Scheerlinck. Picture: Supplied
Australian Institute of Superannuation Trustees CEO Eva Scheerlinck. Picture: Supplied

The nation's compulsory super system started in 1992 at 3 per cent of employee earnings.

It was 9 per cent by 2002 and is now 9.5 per cent, gradually rising to 12 per cent by 2025.

The AIST research, conducted in January, included focus groups and surveys of 1500 adults. It found 46 per cent of 600-plus retirees surveyed believed their retirement was more expensive than they thought it would be, while only 5 per cent found it cheaper.

"I don't think people generally understand how low the age pension actually is," Ms Scheerlinck said.

Including supplements, the pension pays a maximum of $933.40 a fortnight for a single and $703.50 to each member of a couple.

 

Home ownership in retirement is a rising concern for younger generations and super will be many people's biggest asset.

"Half of Millennials will retire without having their own home," Ms Scheerlinck said.

"We all know there's a lot of upward pressure on the cost of living, and some people become unexpectedly single and that pushes costs up.

"There's not a lot of affordable housing around anywhere."

JBS Financial Strategists CEO Jenny Brown said many people entered retirement unprepared.

"They haven't done budgets so they don't know what it will cost them to live," she said.

"They think it will cost less than when they were working, but because they're not working they have these days to do other things."

Meals with friends, coffees and hobbies all cost money that was often not factored into retirement spending plans, Ms Brown said.

Jenny Brown from JBS Financial Strategists says super is the most tax-effective retirement savings vehicle.
Jenny Brown from JBS Financial Strategists says super is the most tax-effective retirement savings vehicle.

"So many people fool themselves," she said.

Retirees and pre-retirees should think about how they plan to spend their retirement to get an idea of the costs.

"It comes down to your cash flow and knowing what you are spending and what you are saving," Ms Brown said.

She said super was still the most tax-effective way to save for retirement, taxed at just 15 per cent during the accumulation phase and 0 per cent once you switched it to an account-based pension in retirement.

@keanemoney

 

 

ENJOY A RICHER RETIREMENT

• Inject as much money as possible into super in the decades before retiring.

• Seek advice about strategies such as the super co-contribution, spouse contributions and tax benefits.

• Use a budget both before and after retiring to track your spending.

• Retirees can unlock equity in their home through the government's Pension Loans Scheme.



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