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‘Mathematical impossibility’ for age pension to continue

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Australians will not be able to rely on the government to fund their retirement for much longer, with various property advisers warning that a vast majority of people – including property investors – are woefully underprepared for retirement.

Speaking to Smart Property Investment, wHeregroup director Todd Hunter said the current system was unsustainable.

“For people our age, there won’t be a pension,” he said. “It’s a mathematical impossibility for there to be a pension on a growing, expanding and ageing population, with only a limited income coming in. It just won’t be there. You will have to support your own retirement.”

Mr Hunter said this “ignorance” would catch-up with people as they approach the end of full-time employment and realise they’re considerably short of their retirement goals. Property investors aren’t immune from this phenomenon, he said, with many not accumulating enough equity and failing to adequately plan how their portfolio will fund their retirement.

Ben Kingsley, director of Empower Wealth and chair of the Property Investment Professionals of Australia (PIPA) said most people don’t realise they have a problem until it’s too late. In addition, projections about the future value of money, changing economies and inflation can confuse and frustrate people, he said.

The Australian Securities and Investments Commission’s (ASIC) MoneySmart guide says that for a single person to have a ‘comfortable’ retirement, they would require $41,830 in annual living costs. If they retire at 65 and live to be 85, MoneySmart recommends a lump sum payment of $544,000.

Philippe Brach, CEO of Multifocus Properties & Finance however, said most Australians are blindly approaching retirement hoping to have more than this at their disposal – even though they will in fact fall woefully short of this goal.

“Around 84 per cent of people in Australia will actually retire on less than $21,000 a year,” Mr Brach told Smart Property Investment. “It’s pretty frightening. Nobody thinks of retirement until it’s too late.”

Australian Bureau of Statistics (ABS) figures show in 2010 females aged 45-49 had just $45,315 in their super on average. Men in the same age bracket had an average of $89,047.

For more insights and detailed strategies on how you can build a retirement-ready portfolio, pick up the July edition of Smart Property Investment magazine, on newsstands now.

To subscribe to future editions of Smart Property Investment, click here.

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