Don’t Panic About Retirement, Prepare

For the past year or so, I have made it my business to conduct an interesting social experiment.

When I am with friends, or extended family members, I ask them about retirement: what they see their life like, what kind of person they would like to be, and what experiences they would like to have.

The answers vary depending on the age of the person I am asking. Younger people tend to predictably imagine themselves travelling the world, loving not working and doing whatever they please.

Friends my age in their 40s and 50s tend to focus on what they want for their kids, and what else they might do outside of their traditional work.

But one thing they all share is a look of panic, when I ask “will you have enough to retire on?”

Very few, no matter their education and earning capacity, have confidently said to me “yes”.

Why? Well, for a start, people are confused about how much they will need as they don’t know how long they will live for, or what that will cost.

I ask them to tell me what sort of life they would like to live, and what this might cost per month. This gets a response, as they start figuring out the travel costs and their life expenses. These may be $5000 per month, or $60,000 a year.

Then, they multiply that out by the amount of time they could live in retirement. This will most likely stretch into their late 80s or early 90s if they are in good health. It’s at this point, the penny starts to drop.

Simple calculations about the minimum super contribution and the years they have left to put enough away to save starts to demonstrate that the life they are imagining is not going to happen unless they change something now.

And the sooner people have this realisation the better. The Association of Superannuation Funds of Australia (ASFA) says that the definition of a comfortable retirement for those people who own their own home, and are relatively healthy, is around $43,000 for a single person, and almost $60,000 for a couple.

For those who don’t own their home (which is becoming increasingly more difficult) this number increases significantly.

And when you think about the definition of comfortable, it’s not exactly high-flying lifestyles.
It’s why the kind of tech that groups like GROWSuper are putting out, which uses an app to show what you will have in retirement with simple graph based on your super contributions, are so important to growing awareness from an early age about planning for the future.

No matter whether it’s your teenage children or yourself at 50, it’s time to do these simple calculations and start to formulate a plan.

Without it, the look of panic when asked the question of “will you have enough?” is more than justified.