Most Retirees Won’t Run Out of Money

Many Australians worry about their retirement savings, fearing they will outlive their superannuation. However, financial data suggests that most retirees actually spend less than expected due to concerns about financial security, often leaving money unspent. While this cautious approach benefits heirs, it may lead to unnecessary sacrifices during retirement.

The Association of Superannuation Funds of Australia (ASFA) provides guidelines on retirement income needs, estimating that couples require $73,077 annually for a comfortable retirement, while singles need $51,805. To achieve this, ASFA suggests a super balance of $690,000 for couples and $595,000 for singles. Fortunately, with compulsory super contributions currently at 12%, many younger workers are on track to reach these targets.

Alternative estimates challenge ASFA's figures, suggesting lower savings targets. Super Consumers Australia argues that more realistic savings goals are $421,000 for couples and $310,000 for singles. Income provider Optimum Pensions also presents lower thresholds, suggesting that couples need $570,000 and singles $488,000 when factoring in age pension benefits and annuity products.

Retirement expenses often decline with age, particularly after the first decade. Even if retirees deplete their super balances, the age pension acts as a financial safety net, offering up to $45,037 for couples and $29,874 for singles annually. Given these factors, running out of money is less likely than many Australians fear, making it possible to enjoy retirement without excessive financial stress.

Source: The Australian, IFA, AIHW