At age 67, Australians could be eligible to receive the Age Pension payment.
This is a fortnightly sum, paid by Centrelink, to help older individuals fund their retirement. It's an excellent tool, but is it enough to be able to afford the lifestyle you want?
Let's take a look.
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How much is the Age Pension?
The maximum fortnightly Age Pension payment will go up next week to $1,237.70 for individuals. Couples will soon get up to $933 per person per fortnight.
This totals $32,180 per year for singles, and $48,516 per year for couples combined.
These figures include the maximum basic rate, the maximum pension supplement, and the energy supplement.
But, not everyone will get it.
Eligibility for the Age Pension is heavily dependent on your income level and the assets you own.
It is possible to earn a part-payment if your income and/or assets are over the threshold, and the amount is generally calculated on a sliding scale.
How much does it cost to retire?
According to the Association of Superannuation Funds of Australia (ASFA), there are two main retirement lifestyle brackets in Australia: modest and comfortable.
A modest retirement is one that allows you to meet essential living costs. It assumes you'll have enough money to fund basic costs like basic health insurance, essential utilities, and grocery expenses. It leaves a little room for infrequent, low-cost leisure activities and perhaps the occasional budget meal out. But it doesn't account for funds for travel, and leaves only a very limited discretionary budget.
ASFA estimates that a modest retirement will cost approximately $36,548 per year for singles and around $52,690 for a couple combined. These figures assume you own your home outright (so additional mortgage or rental costs will be on top) and that you'll receive a part Age Pension.
ASFA defines a comfortable retirement as one that allows Australians to maintain a good standard of living. It covers expenses like top-tier private health insurance, a reasonable car, and regular leisure activities. It also includes money for home repairs and renovations, some meals out, and maybe even an occasional holiday.
The data shows that a comfortable retirement is estimated to cost around $56,166 per year for singles and $78,998 for couples. Again, it assumes you'll receive a part Age Pension and that you own your home in full.
The verdict
No, the Australian Age Pension isn't enough to retire comfortably. In fact, it is even below the forecasted cost of a modest retirement.
For a modest retirement, the gap is around $4,400 per year for singles and $4,200 for couples combined.
For a comfortable retirement, the gap is even wider, at around $24,000 per year for singles and roughly $30,500 for couples combined.
This means you'll need superannuation or alternative savings to bridge the difference between the Age Pension payment and the realistic costs of retirement.
