I’ve just had my first child just before I turn 30.
My father was 30 when I was born and his father was 30 when he had him. Based on this anecdote let’s assume the average 50-year-old has 80-year-old parents and 20-year-old children.
Out of these three, I believe that the average 50-year-old is in the toughest spot.
The average 80-year-old has probably had a pretty good run at retirement. They likely worked until 65 by which time they had their house paid off and a small amount of savings.
Centrelink Age Pension means-testing wasn’t as rigorous then so they probably got a full pension from day one. As a couple they might have received circa $30,000 per year.
Depending on the amount of savings they had they could probably afford to draw a bit extra from their savings which would have paid for some travel in the early years of retirement and as they slowed down they could have used this for other fun stuff (i.e. grandkids). Not a bad life at all.
The average 20-year-old is also in a pretty good spot. Mainly because the superannuation system will have been in place for the entirety of their working life.
Very soon they’ll receive 12% superannuation guarantee contributions. This means 12% of their salary will be forcibly saved in superannuation and compounded over 40 years. By age 60 they’ll have enough to replace their income forever-and-a-day without running out of money.
The average 50-year-old is in a bit of a pickle. They generally haven’t had superannuation contributions for their whole working life like the 20-year-old. There’s a good chance the Centrelink rules they operate under will be dramatically worse.
Already we’ve seen massive changes to means testing reducing the number of people eligible for the full age pension. That’s before we even consider all the talk about changing the age pension age to 67 or 70 or whatever it might be in 15-20 years’ time.
So that’s the bad news. The good news? You can make a massive difference to your retirement savings over the last 10 years of your working life.
We find on average with 10 years to go we can help our clients add around $500,000 to their retirement savings.
So, don’t be demoralised as you hear about rule changes to superannuation or the age pension. The most important thing is to get started on doing everything you possibly can to get in the best possible position.
Don’t rely on the pension and don’t beat yourself up over the fact that you haven’t gotten organised sooner.
The best time to start was 10 years ago but today will do.
Written by Dallas Davison.
Dallas Davison, Michael Hogue and Ali Hogue.