The cost of a comfortable retirement has increased by $130,000 according to the Association of Superannuation Funds of Australia, due to changes to the Age Pension and increases in the cost of living.
The Association of Superannuation Funds of Australia (ASFA) has released an update to the ASFA Retirement Standard, which estimates the annual income required for a ‘modest’ and ‘comfortable’ retirement along with the corresponding required retirement savings.
The June 2015 quarter ASFA Retirement Standard estimates that the superannuation balance required for a comfortable retirement has increased by $130,000, to $640,000 for a couple, compared to the previous estimate. The amount required for a comfortable retirement for a single retiree has increased by $115,000 to $545,000.
ASFA ascribes this increase to “recent changes to the Age Pension means test, together with increases in the cost of living and life expectancy.”
“In particular, adjustments to the taper rate and thresholds for the assets test will impact how people plan to fund their retirement,” said ASFA CEO Pauline Vamos.
“While some individuals with relatively low retirement savings will receive a small increase in their Age Pension after 1 January 2017, others will receive a lower Age Pension, or none at all, until they run down their superannuation. As a result, many individuals and couples will require higher levels of private savings for a comfortable standard of living in retirement.”
Additionally any further changes to the Age Pension eligibility age, or a lower indexation factor, could necessitate increased superannuation savings to provide a comfortable retirement.
“Given the increasing level of super savings that the average Australian will require at retirement, ASFA considers that there is a strong case to increase the compulsory rate of superannuation contributions to 12 per cent of wages as soon as possible,” said ASFA.
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