You may need to fund a longer retirement

Australians are living longer so more of us may need a bigger pool of savings to fund longer retirements. In 1974-75, there were 80,000 people aged over 85 and that number is projected to reach around two million by 2054-55i.

To avoid some of the common money mistakes that happen during retirement, you may need to explore the possibility of working for longer and delaying retirement or consider returning to the workforce.

Your health may affect your ability to work longer

Health is a key factor when it comes to participating in the workforce, particularly as you get older. This can affect your ability to accumulate super and other savings to fund your retirement.

More people aged between 60 and 70 report fair or poor health than other Australians. It’s also predicted that by 2035, one in four men and one in five women in their 60s will have poor or, at best, fair healthii.

This means that if you’re saving for retirement or contributing to your super fund, it may be helpful to start sooner rather than later.

You may need to supplement the age pension to fund your retirement

The Association of Superannuation Funds of Australia’s Retirement Standard shows that a 65-year-old single person retiring today needs an annual income of $44,224 to fund a ‘comfortable’ lifestyle in retirement, assuming they’re relatively healthy and own their home outrightiii.

By comparison, the maximum age pension rate for a single person is $24,770 a yeariv.

This means that to fund a comfortable retirement, you may need to have almost double the amount of income provided by the age pension, either through your super funds or other sources of income.

Another thing to keep in mind is the age you can become eligible for the age pension and the age you can access your super typically won’t be the same. Your access to the age pension will depend on your date of birth and other eligibility criteria, while accessing your super depends on when you reach your preservation age and retire.

You may want to have money set aside for recreational activities

Australians are living longer and more active lives. According to the ASFA Retirement Standard, singles and couples living a comfortable lifestyle spend around 24% of their weekly budget on leisure and recreationv.

So it’s a good idea to give some thought to your hobbies and recreational activities once you exit the workforce. After all, your retirement is the time to sit back and enjoy the finer things in life, so you need to be able to afford to do the things you love.

i 2015 Intergenerational Report – Australia in 2055 page viii paragraph-5

ii AMP.NATSEM 2015 report, Going the distance: Working longer, living healthier page 27

iii ASFA Retirement Standard

iv Department of Human Services - Payment rates for Age Pension table 1

v ASFA Retirement Standard - Detailed budget breakdowns December quarter 2020 page 4