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Ripe age, rotten super - Big Sky Financial Solutions

Ripe age, rotten super



Superannuation and retirement has been on the government’s radar for some time now. While the investment rollercoaster ride over the past couple of years has certainly sharpened the government’s focus on the superannuation system and retirement savings of Australians, a bigger issue has been driving the government-commissioned reviews that were finalised last year.

We’ve known for some time that life expectancies are increasing and that our population is ageing. That the number of so-called ‘Baby Boomers’ – those born between 1946 and 1965 – have started leaving the workforce in greater numbers than the ‘Generation Y’s’ – born between 1982 and 2000 - who will be replacing them. This imbalance will place a greater strain on the government’s ability to pay aged pensions and retirees will need to rely more on their accumulated savings.

Good news and bad news



Adding to this dilemma is the issue of longevity. We’re living longer – on average – in retirement. Of course this is good news, but it’s also bad news if you haven’t planned for it. That’s because your super needs to ‘live’ longer to support you in retirement. Just like you, it needs to be healthy to last the distance.

A 2008 comparative study of the nation's overall health by the Australian Institute of Health and Welfare found that Australians are the second-longest living people on earth. On average, women can expect to live to 84 and men to 79. Of course for someone currently in their 40’s or 50’s, this average could move higher by the time you get there.

If you haven’t planned for a long and healthy retirement of at least 20 years, there’s a genuine risk that you might outlive your savings. And that’s assuming you retire at 65. Anyone born before 1 July 1960 is eligible to retire at 55, their ‘preservation age’ for super purposes. If this person lives to be 90 their money will need to last 35 years!

We all have plans to live to a ripe old age – and you don’t want your super balance rotting away prematurely. It needs to be able to go the distance. If you’d like to discuss how your savings are tracking, please contact a BSFS financial adviser.

How much is enough?



Annual income required at Retirement

$30,000

$40,000

$50,000

$60,000

Lump sum required at retirement



$429,914

$657,219

$821,523

$985,828


Assumtions: Total value at retirement is in future dollars. Assumed earning rate of 7% is net of fees and taxes. Risk profile is Prudent/Balanced (60% exposure to growth assets / 40% exposure to defensive assets). CPI rate of 3%.

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