How to continue funding your new life in retirement

Key points:

• Approximately 53 percent of older Australians are worried about outliving their savings
• There are multiple funding options to choose from to keep you financially stable during your retirement
• You can begin to start accessing your super when you reach between 55-60, depending on the year you were born

Retirement in Australia

Retirement is the long-awaited dream that most of us work hard for. There is no fixed retirement age in Australia and you can access your superannuation from 55 years and over.

However, this depends on what year you were born. If you were born before 1 July 1960, 55 is the preservation age to start accessing your super. If you were born after 1 July 1960, the preservation slowly increased depending on the year you were born.

The age pension is available for anyone who has reached the age of 67 years. However, the Age Pension is only available to individuals who are under the Services Australia income and assets test limits.

The current life expectancy for females is 85.3 years, while males have an average life expectancy of 81.2, as per recent data from the Australian Bureau of Statistics. However as the years go on, life expectancy rates continue to increase.

One peak body for older Australians, National Seniors, has highlighted through research that many older Australians are outliving their savings and are very concerned about their future.

According to this research, around 53 percent of survey participants were concerned about outliving their savings, although 59 percent of women were worried compared to 47 percent of men.

Approximately 23 percent of people without superannuation funds reported frequently being worried about having limited savings.

Women are at greater risk of having lower retirement funds as women are more likely to have less than $500,000 in savings due to lower wages and maternity leave. Additionally, women have a higher rate of relying on the age pension as an income source compared to men, as per information on the Parliament of Australia website.

National Seniors Chief Executive Officer Professor John McCallum highlighted the extent of the worry felt by older Australians related to their financial security.

“Australia has one of the best pension systems in the world, yet Australian retirees are still showing high levels of worry that they will outlive their savings,” he said.

“This shows a need for better advice and education to help older Australians manage their savings so they can have the confidence to spend their money and enjoy retirement.”

What you should be saving for

The Association of Superannuation Funds of Australia says there are two options you should choose from when it comes to saving, whether you want to live modestly or comfortably in your retirement.

Keep in mind that the modest lifestyle and comfort lifestyle is based on the assumption that the person owns their own home and is healthy.

Your decision will impact on how much you may need to save for your time during retirement.

The ASFA says that while the Age Pension is available, it is better to live modestly in retirement than survive on the Age Pension, as many groups highlighted that it is inadequate to provide a decent standard of living.

ASFA suggests that to live a modest lifestyle (as of October 2024):

• A single person will require $638 dollars per week or $33,134 dollars per year
• A couple will need $918 dollars per week or $47,731 dollars per year

This amounts to $954,620 for 20 years’ worth of savings for a couple or $662,680 for a single person.

To live a comfortable lifestyle (as of October 2024):

• A single person will require $1,001 dollars per week or $52,085 dollars per year
• A couple will need $1,410 dollars per week or $73,337 dollars per year.

This amounts to $1,466,740 for 20 years’ worth of savings for a couple or $1,041,700 dollars for a single person.

Any additional expenses or purchases you may have will add to your saving requirements.

For example, if you have complicated health requirements, this could impact your savings. Or if you wish to travel, this is another large expense. Even buying a vehicle, caravan or home can impact the funds you have in retirement.

For more information on preparing for your retirement or superannuation, head to the ASFA website.

Ways to fund your retirement

Preparing your nest egg for retirement is difficult, but it can be even more tricky if your nest egg isn’t as large as you were hoping.

Having low financial stress issues can result in a better retirement time, so it’s important to take action and start financial planning for your retirement.

Below we’re explaining a number of different options to help towards a stress-free retirement. However, before making any financial decisions, it is important to get specialised advice, tailored to your personal circumstances, from a financial advisor. Head to the AgedCareGuide financial service finder to browse a financial advisor near you.

Account-based pensions

Also known as an allocated pension, an account-based pension provides a regular income that is purchased with the money you have in your super that is available once you reach “preservation age” (when you can access your super).

Once eligible, you can transfer all or part of your super to an account-based pension and receive regular income payments.

As this is within the superannuation system, income and payments are generally tax free. However, it’s important to understand that your income is not guaranteed, if your investments don’t perform, you may receive less than you planned for.

Having an account-based pension means you can withdraw a minimum amount from your pension each year, and that percentage will steadily increase as you age. This income will be paid to you either monthly, quarterly, every six months or annually.

How long an account-based pension lasts depends on your withdrawals each year, any investment return you have and the fees you pay.

You may be able to get an entitlement, such as the age pension, while having an account-based pension. You will need to undertake an income and assets test.

Annuities

An annuity is a financial product, this means you have a contract with either a super fund or life insurance company to make a lump sum payment to receive regular income back.

This can bring in guaranteed income for a defined period, and you can decide if the payments last the rest of your life or for a couple of years.

You receive a guaranteed payment regardless of market performance or interest rate changes. On the downside, you don’t have the flexibility to withdraw more if you need extra cash.

Annuities are available for purchase from either a super fund or life insurance company, which you would buy with a super, or other savings, lump sum.

Pension and other government assistance

There are several ways to receive government assistance during your retirement.

The age pension provides not only financial support but also access to other concessions, like travel or access to venues. If you work past the age pension age, you could even be eligible for a part pension. A part pension is only provided if the individual, or couple, has too many assets to receive the complete age pension.

You can continue making super contributions into your super up until 75 years of age.

There are also other concessions available which you may be eligible for. For example, most people over 60 who aren’t working full time will be eligible for the Seniors Card which offers travel concessions as well as discounts for a range of other goods and services.

Additionally, you could be allowed to attend events or places, like zoos or State shows, at a reduced rate or even for free, if you have a concession card. You may be eligible to receive subsidies on electricity or a water/gas rebate.

Services Australia and the Department of Veterans’ Affairs handle these matters. You may be provided with additional subsidies depending on your health status.

For more information on what concessions or services are available to you, head to the Government Concessions website and click on your State or Territory to be directed to specific concession information.

Discretionary income

Discretionary income is the amount left over after you have paid all of your taxes, basic living costs and bills.

It is income that is already available for disposal and is used on the finer things in life, but should only be done after you have spent your money on essential things.

Discretionary income covers any payments made for fun or activities, or for unexpected emergencies when you have looked after life’s essential expenses with a retirement (or semi-retirement) income stream.

Term deposit

A rather common type of investment, term deposits are a savings product you can get from a bank, credit union or building society, where you invest your money for a fixed period of time with a fixed interest rate.

It’s a popular way to earn money for life’s pleasures and emergencies because the cash you receive is easy to access, it’s liquid. Another benefit is the safety of a term deposit because your original investment is returned at the end of the term.

To find more tips for successful ageing, head to the Home Instead Senior Care website for their guide to preparing for retirement.

Keep in mind

Retirement should be a time for you to enjoy yourself. Make sure you take into account the extra activities or travel costs that you will need to cover when planning for your retirement, and choose the right option for you to fund your lifestyle during retirement.

Contact a financial advisor to get guidance on your retirement plans and work out the best option for you.

*Disclaimer: The information in this article on the Aged Care Guide is general in nature and does not constitute legal or financial advice. Readers should seek their own personal legal and financial advice from a suitably qualified retirement or superannuation practitioner.

What are you looking forward to in your retirement? Tell us in the comments below.

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