Life on the aged pension can be a daily struggle with little to no buffer to make sure ‘ends meet.’
A single retiree who qualifies for the full government age pension can expect to receive close to $23,000 a year, including pension and energy supplements. A couple can expect to receive a little over $34,000 each year. No doubt about it, life on the aged pension is tough.
If you’re lucky enough to be debt free, chances are you can just make do from week-to-week, but when big ticket items come along, you’re likely to really struggle. If the car needs replacing, or the washing machine needs repairing, few have anything to fall back on in reserve.
Therese Jarrett of Trusted Aged Care Services says “I advise all my clients to maximise retirement savings before leaving work so they don’t need to rely solely on the age pension.”
It’s sage advice when you consider what the government will provide for retirees who leave the workforce with little in the way of assets (from 1 January, 2017 this will be less than $250,000 in total assets for a single homeowner or $375,000 for a couple who own their own home).
According to The Association of Superannuation Funds of Australia (ASFA) the income levels are not a long way off the amount that is considered necessary to lead a “modest” lifestyle, but “frugal” is possibly a better description.
ASFA’s estimates for the September 2016 quarter, suggest a single pensioner between 65 and 85 years, would need an income of $23,996 to achieve a modest lifestyle. This means spending nothing on lifestyle items like gifts, music, home maintenance or international holidays. This income level allows for:
- $962 p/a on domestic holidays
- $25 p/m on entertainment
- $8.40 p/m for medications at the chemist
- $77 p/w on groceries
- $36.75 p/m on home phone, broadband and mobile
- $10 p/w on alcohol
That doesn’t allow for treats for the grandkids, a nice bottle of wine, a good piece of meat or trips to the theatre or movies.
Therese Jarrett suggests that actively managing and continuing to build up superannuation through your working life is key to not relying completely on the pension, and having options in retirement. Being able to supplement the pension with annual drawdowns from superannuation savings via annuities and pensions can make like much more bearable.
In the case of a couple, according to the ASFA, they would need to generate $34,216 a year to achieve a modest lifestyle. This limits combined spending to things such as:
- $39 p/month at the hairdresser
- $124 p/month on clothing and shoes
- $160 p/week on groceries
Again there is no provision for anything additional to ‘surviving.’
In order to lead a “comfortable” lifestyle in retirement, an individual would need an annual income of $43,062 p/a and a couple $59,160 p/a suggests ASFA, meaning those savings will be needed. That might be a tall order, but the reward for being able to save this much will be more money available for meals out, vacations, wine and treats.
Many struggling on the pension are doing it tough, but chances are future generations won’t have the luxury of an age pension, and like many countries, will need to provide entirely for their own retirement, or rely on the generosity of family and community.
Those who can no longer afford to live in first world countries such as Canada and Australia are considering moves to where life is cheaper, in places such as Mexico, The Philippines, Bali or Thailand, which in turn raises a whole different set of issues.