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Retirement Living Standards Aren't So Bad........

Discussion in 'General Property Chat' started by MTR, 30th Apr, 2016.

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  1. MTR

    MTR Well-Known Member Premium Member

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    Thought this was a very interesting article (The Age)

    I think this is pretty much stating that those who retire at 65 on the pension can live well/comfortable on $30,903 (couples) and $58,784 Association of Superannuation Funds is quoting as "comfortable lifestyle" is over the top.

    Sounds a little too lean.....

    http://www.theage.com.au/comment/re...you-dont-need-much-super-20151206-glgmjj.html


    "The latest scary figure, produced by the Association of Superannuation Funds, is $58,784 per year. That's how much it says a 65-year-old couple needs to live on in order to enjoy a "comfortable" retirement.

    At the risk of stating the obvious, after tax and rent or mortgage payments most working Australians couldn’t afford such comfort.

    It's absurdly high. The fine print shows such a couple would spend $40 a week on alcohol, $80 a week on dining out, almost $200 a week on food and groceries, $136 a month on the phone and internet, $4000 a year on holidays within Australia, and $14,000 every five years on a holiday abroad.

    The Association of Superannuation Funds estimate of how much a 65-year-old couple need to live is absurdly high. Illustration: John Shakespeare Photo: Illo:Shakespeare

    Plus this: the best part of $250 a month on new clothes and shoes, $80 a month on hairdressing, $54 a month on pest control and/or an alarm service, and $350 a month on private health insurance

    At the risk of stating the obvious, after tax and rent or mortgage payments most working Australians couldn't afford such comfort. How did such a figure come to be defined as the gold standard used to justify steady increases in compulsory super contributions and to attack plans to tax them properly?

    The truth is that living costs plummet on retirement. Most retirees no longer face a mortgage, a saving of 30 per cent. Most no longer pay tax, no longer have children living at home, and no longer habitually save up to 10 per cent of each pay packet.

    They also no longer incur the substantial costs of heading out of home and going to work: petrol, parking, work clothes and the temptations of the office cafeteria. And they have more time to shop and cook, meaning they get better value and pay less for food. So comfortable are retirees spending far less than the industry says they need to, that most actually save.

    There may well be other Australians for whom retirement is uncomfortable, notwithstanding the pension of $20,498 for singles and $30,903 for couples. But for most it's OK, no worse than working. There's no need to hand a $2 trillion industry tax concessions in order to help them".
     
  2. Marg4000

    Marg4000 Well-Known Member

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    These figures are all based on the assumption that the pensioner owns a fully paid off PPOR.
    Marg
     
  3. sash

    sash Well-Known Member

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    We are a very fortunate country...our pensions whilst means tested are quite generous compared to other countries. Agree that it maybe tight ..all the more people need to plan.

    For example in the UK the basic pension is 120 pounds per week it is not means tested but you have to pay something like 12% national insurance

    In Germany the pension is something like 700-2500 Euros per month but that is after paying like 40-50% of your salary for health, pensions, and taxes. Again it is not means tested.

    I for one would like to see the following to minimize our pension payouts to only people who need and to ensure most people have a decent amount on retiring:

    1. Increase of the current 9.5% superannuation paid by companies to increase to say 10%. Cap lets say is set at 18k so companies are not disadvantaged.
    2. Make it mandatory for everyone to contribute superannuation say 5% once they earn over say 38k. Allow them to pay pre-tax with as now.
    3. Finally allow people to pay on top of the 5% but with only a 30% rebate.
     
  4. MTR

    MTR Well-Known Member Premium Member

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    Good points:)

    I did not realise until about 2 months ago... Australia is NUMBER 3 in the world - best pension, in front of us is Denmark and Germany.

    Though I have to wonder moving forward whether this will be sustainable???

    MTR:)
     
  5. mouseburger

    mouseburger Active Member

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    This article ignores the fact that people are living longer. Many will still be active and will want to able to afford hobbies and other nice things, or maybe help out the kids. Others may need to fund ongoing medical costs associated with ageing. So telling people they don't need much money in retirement, regardless of it's from super or other investments, I think is misleading. People need to be more proactive about retirement planning instead of listening to motherhood statements like "you don't need that much money in retirement" or relying on handouts. Better to have too much money than too little.
     
  6. MTR

    MTR Well-Known Member Premium Member

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    This is true, however medicare is free for pensioners at least I think so?

    Also pensioners receive many deductions ie rates, transport, medication, consumer items

    Helping children, well that is not compulsory, I expect most on the pension wont be doing this.

    I agree with you - people do need to be proactive about retirement.

    I know people on the pension who have paid off their houses, cars etc. live a simple but a good life.

    They still go on holidays, there are many business' which cater to this group (Cheaper options)

    I am not suggesting that we should all live off the pension, just being devils advocate, I believe there is some truth to this article.
     
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  7. C-mac

    C-mac Well-Known Member

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    Thats what alarms me the most, MTR.

    In fact, i've mentioned several times on this forum in a number of posts that one of the biggest motivators for me getting in to property in the first place was my non-belief that retirement government handouts (pension/welfare) would be available to me.

    Even if it remains, it'll be means-tested to the hilt and only those who are in severe poverty will likely qualify. This is actually probably the way it should be.

    But for me personally, the idea of spending 20-30 years just scrimping and scraping to get by, could not be more repulsive.

    I live modestly and within my means for now. But I reckon I'll be grumpy old man in 30 years and wont have tolerance for means. By then, I'll want some indulgences. I'll want my annual cruiseships etc. So what, I'll have worked hard for it by then!

    I don't need to live in a palace or anything, but how s**t would it be to be like the article above mentions, i.e. actually spending (read: wasting!) Your time scrimping the latest weekly woolies bargains to save $8.00 at the checkout. No bloody thanks.
     
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  8. sash

    sash Well-Known Member

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    Yes Australia whilst means tested actually has a great pension system....Denmark, Netherlands are the leaders...Germany is paring back their systems very quickly

    And...yes the pension in the current format will very unaffordable...and the govt will look for creative ways them to get their hands onto some of the self-funded retirees as I suspect they will form 15-20% of Australia in the next 20 yrs.
     
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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    $58k net is about $75k gross income for someone who is working (one income household).

    Much more than the couples pension and possibly below the income threshold to receive part pension. Ie two free intrastate train trips, discounted rates etc.

    This amount is above the median wage - so not for everyone.
     
  10. MTR

    MTR Well-Known Member Premium Member

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    I am a older than you, but would you believe that this has been mentioned for the last 25 years I reckon and nothing happens. I expect it will go one for another 25 years.

    In fact the financial wizards have worked out a formula on how to tweak the system/the sweet spot, where you receive part pension and have some super.

    I guess investors must ask themselves so much effort to achieve financial freedom via residential property and the reality is not many will achieve enough cash flow income from resi property... may be easier to do what everyone else does?? Some money in Super perhaps $300K and part pension, gives you comfortable lifestyle apparently.

    How many properties will you need to achieve this income after tax?? I don't know, just throwing it out there, makes you wonder really???

    MTR
     
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  11. Cbrgirl

    Cbrgirl Well-Known Member

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    I'm of the view that superannuation is a scam and the government should provide a basic old-age pension to everyone. If you pay tax, some of your tax should be put aside each year for your old-age pension and you should be able to see on every tax return how much has been put away for your old age pension. If you want to contribute more to your government old age pension, you can add to it every year if you want to. If you want to have private extra super on top of that - that's totally up to you - but it should never be compulsory for me to give my money to private companies - too many fees, unregulated, no guaranteed return, too many market variables etc.

    An older article, but the sentiments are true:
    Australia's super system is a national disgrace
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    A sense of entitlement?

    If you want the pension blow all your money each week you will get your wish.
     
  13. sash

    sash Well-Known Member

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    This was exactly the convo I was having with someone. with some and recommended with what they have today and look to maximise it now vs buying more properties when they are in their mid to late 50s.

    Having just a little more is also not good..because the way the goobermint is going they will not provide you with much.

    I recall a guy in 2009 he was about 57 at that time.....he was got some excellent advice from his planner (very rare) basically he had his home fully paid off in Dural and had a decent amount in super over 800k (he as a senior manager for most his career) and has had one IP witth 200k equity.

    Anyway the planner recommended that him and his wife sell their place in Dural for 1.5m and downsize to something more manageable to 900k. He recommended then to take the tax free proceeds and invest that into super (i think it was under 450k people could put into both for and wife). He then he suggested he pull the plug on work at 58k. And in the new financial year sell his investment property but not pull any money out of super yet.

    So with no income..he would have paid very little tax on 200k gain between him and his wife.

    And then from 59 yrs he would draw down on his super paying very little tax.

    He was delighted with this....as I think between him and his wife they are getting about 90k and pay very little tax.

    So yes there are many ways to skin a cat...only one constant and that is careful planning is involved. This is why I am now looking to develop my exit plan...and how to execute on it.

     
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  14. ellejay

    ellejay Well-Known Member

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    I haven't even considered a pension payout in my retirement calculations even though I've fully paid my contributions for a UK pension. I'm guessing by the time I'm able to claim it I won't qualify. I can't even touch my super until 60 but there's no way I'd want to work that long. If I live long enough, and can get a pension on top of investments I'd have to take up some new expensive hobbies to spend all the money, but I'm not holding my breath.
     
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  15. MTR

    MTR Well-Known Member Premium Member

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    what would the alternative be? you would still want your money working
     
  16. joel

    joel Well-Known Member

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    Hear hear! I plan on having the money to retire way before age 65 (67?) - when I can finally access whatever super I have, it will be a bonus. Id rather have the money in my pocket now though - the more control I have over it the better. SMSF isnt really viable for most people with average incomes
     
    Last edited: 30th Apr, 2016
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  17. Scott No Mates

    Scott No Mates Well-Known Member

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    This may be true if you have not contributed 1 cent out of your own pocket.

    So you may have missed out co-contributions (money for nothing).
     
  18. balwoges

    balwoges Well-Known Member

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    What a lot of older couples dont factor in until too late are nursing home fees. My husband had Parkinsons and spent the last nearly five years of his life in a nursing home. When he was admitted the fees were $1,850 pm, when he passed on I was paying $2,500 pm with more increases in the pipeline. It wasn't something we expected and I was really battling to pay the fees at the end.
     
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  19. GreenGoblin

    GreenGoblin Well-Known Member

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    You make an excellent point, balwoges. I'm sorry to hear about your husband - it must have been extremely difficult. It goes to show that while we try to save enough for financial freedom/retirement, we still need to enjoy life while we have our health, as you never know what might happen (very philosophical, but still so true).

    A much older cousin of my wife has a fairly successful business which he and the family still very work at, and at 68 he's just had a stroke, which has totally changed things. We'd thought they'd have been able to retire years ago; hopefully he recovers fully and is able to enjoy retirement, but this has certainly changed things for them.

    As far as expenses go, once one's health declines significantly, one stop spending on holidays and going out as often and starts spending on medical bills, so there is some offset in expenditure, but from what you're saying, not that much offset. Once again, thanks for your insight.
     
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  20. spludgey

    spludgey Well-Known Member

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    I wouldn't put too much faith in that budget.
    Have a look at the excerpt below. You could possibly argue that a comfortable retiree is likely to live in a newer property and is thus paying less for repairs, but this isn't the case for the couple.
    The one that doesn't add up for me at all is the rates. They should definitely be higher for the comfortable lifestyle.


    upload_2016-5-1_9-46-12.png
     
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