It’s a common question – Is the Age Pension enough to live on in retirement? As is so often the case, the answer is: ‘it depends’. It depends primarily on two things – your level of spending, and the amount of age pension that you are entitled to.
ASFA (The Association of Superannuation Funds of Australia) produces the ASFA Retirement Standard, which benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle. ‘Modest’ or ‘Comfortable’ lifestyles are defined as follows:
Modest retirement lifestyle
Better than the Age Pension, but still only able to afford fairly basic activities.
Comfortable retirement lifestyle
Enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.
See: www.superannuation.asn.au/resources/retirement-standard
It is important to note that the maximum Age Pension does not meet ASFA’s standards as per the following shortfalls (as at Sep 2013):
Age Pension (maximum)
- Single: $21,505
- Couple: $32,417
ASFA modest lifestyle income requirement
- Single: $23,032
- Couple: $33,120
ASFA comfortable lifestyle income requirement
- Single: $41,830
- Couple: $57,195
How much Age Pension are you entitled to? You will be measured on either the ‘assets’ or ‘income’ test:
The income test reduces the Age Pension by $0.50 per fortnight for each dollar earned above:
- Singles: $156 per fortnight
- Couples: $276 per fortnight combined.
The asset test reduces the Age Pension by $1.50 per fortnight for each $1,000 of assets held above:
Homeowners
- Singles: $196,750
- Couples (combined): $279,000
Non-homeowners
- Singles: $339,250
- Couples (combined): $421,500
Source: Department of Human Services, ASFA
Need some retirement planning advice? Contact us today to book an appointment: 08) 9267 3488 (Perth) or 08) 9756 7605 (Dunsborough), or clientsupport@justinvest.net.au
