How Scary is Australian Retirement? How Much Money Do We Really Need to Retire Comfortably?

Australia’s retirement system is known to be among the best in the world. With the government’s age pension and mandatory “Superannuation Guarantee” programs from employers, it has far exceeded other industrial nations like the United States when it comes to high individual savings rate.

However, Australia’s system also has some flaws. The programs mentioned hold a level of risk because the programs are strongly dependent on defined contribution plans. Employees with defined contribution accounts- who rely on a means-tested benefit that is the government old age pension- would possibly face problematic incentives. Plus, the pension age is expected to rise to 70 in 2035, making employees work longer in life unless they can afford to retire early.

Although this is the case, the country still has a relatively healthy superannuation compared to other countries. Because of this, Australians don’t really need to reach 70 to finally retire and get the old-age pension.

Having said that, how much money will it cost you to retire comfortably?

How to Qualify for the Pension

Unfortunately, lower income earners won’t benefit that much from their pensions; some of them won’t even qualify.

Single individuals who earn more than $1841.60 per fortnight, or couples cashing in more than $2817.20 won’t qualify for the full-aged pension.

Because the pension is a means-tested benefit, the government will look into your property investment, superannuation, assets, personal belongings, and more things to assess your qualifications.

If your assets are worth more than $672, 750 for a single homeowner, or $815, 250 for a single person without a house, you’d be a part-pension recipient.

The amount for couples who own homes is $758, 750, or $901, 250 for non-homeowners.

Basic Lifestyle

The Australian aged pension gives only $21, 913 a year for a single person or $33, 036 for a couple, which is enough to afford a basic lifestyle.

The good thing is that it includes discounts on health services and amenities costs – for now.

Modest Lifestyle

You can already afford a modest retirement lifestyle from your pension with $23, 283 per year if you’re single, or $33, 509 if you’re married. This option only lets you enjoy low-cost activities but travelling overseas isn’t one of them.

It’s still a bit difficult to maintain this lifestyle. According to ASFA, singles retiring at this age should set aside a $75 budget per week for food and $17 per week for clothing.

Without the age pension, singles living in Sydney or Australia should retire with $432, 000 and couples $621, 000 to afford a modest lifestyle.

On the flip side, retirees who are eligible for the full pension can retire early, only that they’ll receive less money to fund a modest lifestyle.

Comfortable Lifestyle

A comfortable lifestyle for retirees means that they can afford a lot of things, such as a private health insurance, quality household goods, and the joys of overseas travel.

For you to fund a comfortable lifestyle, you will be provided an annual income of $42, 158 if you are single or $57, 665 if you’re a couple.

Singles must budget $108 a week for food and $38 for clothing.

This allows a retiree to have “a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.”

Singles are supposed to save superannuation of $785, 000 and couples $1.07 million for this retirement option to be achievable.

Those who are eligible for an age pension but want to live a comfortable lifestyle need to have at least $527, 000 if they are a couple and $465, 000 if they are single upon retirement.

If you want to maintain the lifestyle that you enjoy the most, you should be saving more money. Moreover, if you are looking to increase your age pension, better own a home to qualify for a better retirement option. As what’s stated, the government will look into your investments and assets to assess and qualify you for an age pension.

At Calla Property, we make investing in a property easy for you. If you’re living in Sydney, we’ll help you find the right property in the right location. We’ll research everything there is to know to minimise the risk of property investment in Australia.

Planning to retire comfortably in Australia? Start with Calla Property today. We have helped many Australians into a property funded retirement plan.  We start by qualifying investment grade properties that will yield, in today’s money around $25 000 per year, with low overheads or holding costs. We aim to fund 4-5 investment properties by retirement so that once the debt is paid, the client can expect a much more comfortable retirement salary of $90-100 000. Would you like to find out how we can do this for you? You’ll be surprised at the starting point and how far we can take you.  Call 02 9016 2852 for a complimentary strategy assessment today.