Yet most just don't have enough super to retire comfortably.
I was surprised when I recently read in the Australian Financial Review that the "average" Australian retiree is self funded.
Australia has reached a major milestone, with most new retirees having enough savings to be self-funded rather than reliant on the age pension, new research shows.
More than half of 66-year-olds were not accessing the age pension at December 2018 because their assets and income were too high, while 20 per cent were on a part pension.
Only 25 per cent were drawing a full age pension.
The age at which people become eligible to apply for the means-tested age pension increased to 65.5 in July 2017 and will rise again to 66 on July 1.
Not enough in my book!
Some of my younger readers wouldn't realise this, but compulsory super has only been around for 27 years, meaning the balance in the average superannuation account for retirees is not that great.
According to Challenger :
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- the average consolidated balance for singles approaching retirement (that is, those aged 60 to 64) exceeded $300,000 in 2016-17.
- At the household level the average would be $400,000, which Challenger estimates will rise to $600,000 in five years (not discounted for inflation).
The superannuation industry says single people who own their own home and are in relatively good health need $454,000 in savings (and couples $640,000) to achieve a comfortable retirement.
A lump sum in this vicinity would allow for annual spending of $42,953 for singles and $60,604 for couples.
Really? Last time I checked dog food didn't taste very good!!
With the typical super balance at retirement for a household being over $400,000, and most owning their own home, a sizeable majority of new retirees won’t be entitled to the full age pension at the start of retirement.
And I'm not really sure how future governments will be able to support all the retiring Baby Boomers with pensions and health care in the future.
Don't count on your super or the pension to fund your golden years.
Take control of your financial future by building an asset base that will help supplement your super.
The best way I know to do that is to build a portfolio of investment grade properties.
And the sooner you start, the longer you have compounding and leverage working for you.