Australians can retire with a lot less than what the superannuation industry is recommending – if they are prepared to forgo a flashy new car and regular overseas holidays.
Financial advice author Scott Pape, better known as the Barefoot Investor, has suggested $250,000 is enough to withdraw on.
That is less than half the $535,000 the Association of Superannuation Funds of Australia (ASFA) is recommending for someone receiving the aged pension at 67 from July 2023.
Paper recently endorsed recommendations from Super Consumers Australia, which believes $258,000 is sufficient for an individual who has paid off their mortgage.
Financial advice author Scott Pape, better known as the Barefoot Investor, has suggested $250,000 is enough to withdraw on
Director Xavier O’Halloran said the figure, based on living off $38,000 a year, was designed to reflect someone maintaining an existing standard of living.
Super savings recommendations for home owners
SUPER CONSUMERS AUSTRALIA: $258,000 savings for an individual living off $38,000 a year for a ‘medium’ lifestyle
They recommended $73,000 in savings for a ‘low’ $29,000 a year lifestyle
The ‘high’ lavish lifestyle requires $743,000 savings, costing $51,000 a year
For couplesthe ‘medium’ recommendation was $352,000 to live off $56,000 a year
The ‘low’ savings goal was $95,000 to live off $42,000 a year
The ‘high category’ is $1.021million to live off $75,000 a year
‘You might be looking at not buying the flashiest new car off the lot,’ he told Daily Mail Australia.
‘If that’s what you were doing before, this is really reflecting how you maintain that standard of living.’
The recommendation is also based on holidaying within Australia every year rather than going overseas.
‘This is really reflecting what people are spending at the moment,’ Mr O’Halloran said.
But Mr O’Halloran, whose group works with consumer organization CHOICE, said Australians still renting by retirement age would need to have a lot more saved up.
A frugal individual who had paid off their home would need to have $73,000 saved up to survive on $29,000 a year.
A renter, however, would need to have $140,000 in retirement savings to cope with unexpected cost of living increases.
‘For renters, they’re facing much higher levels of financial hardship and income poverty,’ Mr O’Halloran said.
‘The overall message is if you’re not a homeowner in retirement at the moment, your chances of facing financial stress are much higher.
‘We’re all concerned about the decreasing rates of home ownership and how it will continue to play out like it has been in younger generations, as more and more people head into retirement.’
Director Xavier O’Halloran said their retirement savings recommendation, based on living off $38,000 a year, was designed to reflect someone maintaining an existing standard of living. ‘You might be looking at not buying the flashiest new car off the lot’ (pictured is the latest Land Rover Defender)
How much super you should have by age
Source: Association of Superannuation Funds of Australia based on ages as of 2020
Pape said the ASFA recommendation of $535,000 for those receiving the pension at 67 – or $545,000 for those retiring a bit earlier – was unrealistic.
That is based on an individual needing $46,494 a year to live on.
‘For far too long the super industry has played to the millionaires in the members’ stand,’ Pape said.
For couples, ASFA recommends a total of $640,000 to live off $65,445 a year.
By comparison, Super Consumers Australia’s medium recommendation for couples is $352,000, to live off $56,000 a year.
Mr O’Halloran said financial counselors he had spoken to were concerned about unachievable super savings goals.
‘Presenting unrealistic targets to people – telling them they have to double their super overnight as they head towards retirement – isn’t going to be helpful,’ he said.
Nonetheless, Super Consumers Australia is recommending $743,000 for individuals wishing to enjoy a more lavish lifestyle costing $51,000 a year, which would pay for an annual overseas holiday.
For couples in the ‘high’ expenses category, it’s $1,021million to live on $75,000 a year.
‘For that category, I’d expect typically they would be taking regular holidays, they might have an overseas trip,’ Mr O’Halloran said.
‘If they were able to do that on that salary prior to retiring, they could expect to do it into retirement.’
Nonetheless, Super Consumers Australia is recommending $743,000 for individuals wishing to live a more lavish lifestyle costing $51,000 a year, which would pay for an annual overseas holiday (pictured is a sightseer photographing the Statue of Liberty in New York)