Most West Australian couples are retiring with less than one-third of the savings they need to live “comfortably”.
New figures show WA couples need about $58,000 a year to retire – or about $1 million if they retire at 65 and live until the average age. Yet most males retire with just $200,000 in savings and superannuation. The gender pay gap means most women have just $105,000. And the age pension, which equals about $16,700 a year for couples, does little to make up the shortfall.
Couples eligible for the age pension must be over 65 and have an income less than $284 a fortnight. Above that, a reduction in payment of 50 cents for each dollar is incurred. Experts warn that leaves many older West Australians with no choice but to sell assets, such as downsizing the home.
The Association of Superannuation Funds of Australia defines a “comfortable” retirement as one that includes a “broad range of leisure and recreational activities”, a “reasonable” car, private health insurance, “good clothes” and “occasionally” international holidays. The bulk of the $58,000 needed to retire comfortably goes towards leisure (28 per cent), food (17 per cent), transport (13 per cent) and health (12.5 per cent).
Single women require about $42,000 a year to retire comfortably, while a single man needs about $40,000. In the past five years, the amount of savings required for “comfortable” living has risen 14 per cent. Research by the University of Melbourne and consultancy Towers Watson found 47 per cent of Australian couples and 78 per cent of singles over 40 don’t have enough funds to retire.
Nicolette Rubinsztein, head of retirement and advocacy at wealth management fund Colonial First State, said most West Australians should increase the amount of super they put away. “Most people retiring today haven’t accumulated enough, they haven’t had (compulsory contributions) of 9 per cent their whole life, they have a lot less than they need,” she said.
“The average Australian should contribute 15 per cent of their salaries to get closer to that comfortable retirement.” ASFA director of research Ross Clare said the amount of superannuation will increase as the compulsory superannuation system matures.
“By 2026 the average amount, covering both men and women, is projected to be nearly $400,000 – although many people will have less than this,” he said Ms Rubinsztein said those who can’t retire comfortably will have to retire “modestly”.
“It’s very tough, a lot of Australians have a lot of money built up in their homes and increasingly they will access that home equity by downsizing or taking out a reverse mortgage,” Ms Rubinsztein said. Couples need about $33,000 a year to retire “modestly”, ASGFA says.
Lifestyle sets price
Simon and Jackie Adams believe retirees need $100,000 a year to live comfortably.
The Nedlands couple, who hope to retire within 10 years, say they want a certain lifestyle and $58,000 a year wouldn’t cut it. “You could probably live comfortably at $58,000, but I think you would need something closer to $100,000 if you still want to enjoy the luxury life,” Mr Adams, an account manager, said.
“I would position us as upper-middle class, where you need more money because you expect to use more.” Mr and Mrs Adams, a teacher, want to travel the world when they retire, instead of the typical grey nomad-style trip around Australia in a caravan.
“It would have been nice to retire five years ago, but in modern days you have to work longer,” Mr Adams said. “I envisage among all my friends, the doctors and lawyers, they have to work to 65-70 because we are so much healthier and active. “It’s because we’re baby boomers, we want more out of life.” Married for more than three decades, the couple, whose children now live interstate and overseas, have lived in Nedlands for the past 15 years.
The Adams would like to downsize their home. “We’ve looked around for a smaller house in our neighbourhood, but if we sell our house it’s an extra half-a-million for a house in Cottesloe that’s half the size,” Mrs Adams said. They have a holiday house in Melros Reserve, an hour’s drive south of Perth.“We can use Melros as capital now, whether we sell that and buy something in Dunsborough after that,” he said.
“If you own the assets and you don’t have a mortgage by the time you retire, then the $58,000 a year becomes very useful. “But if you’re still trying to pay off the asset, there’s a mortgage structure and you’ll find it tough.”