Retirement is getting tougher as higher debt offsets superannuation growth

More retirees are finding it harder to make ends meet.

More retirees are finding it harder to make ends meet. Photo: TND

Retirement is getting tougher for Australians, with 38 per cent reporting they are struggling financially compared to only 30 per cent 10 years ago.

Research by Industry Super Australia found that, among people in the early years of their retirement, not only were more retirees having financial difficulties, but fewer had spare cash and considered themselves reasonably well off.

Retirees are also carrying much more debt, with half having debt the equivalent of half their asset base.

Only 18 per cent were in that position 10 years ago.

In the first year of retirement, only 28 per cent considered themselves comfortable compared to 48 per cent a decade earlier.

Of those who retired at a time of their choosing, 36 per cent were comfortably off, whereas of those forced to retire, only 21 per cent considered themselves well off.

The difficulty of surviving the post-work years is an increasing concern.

Research from National Seniors found that 53.76 per cent of people worry they will outlive their superannuation balances.

It also found two-thirds of retirees expect to run out of money within 20 years.

Source: National Seniors

Another 12 per cent of people in the survey say they used to worry about their retirement balances but no longer do.

That, National Seniors found, was because they had adjusted their circumstances to improve their ultimate retirement balances.

National Seniors chief advocate Ian Henschke said unemployment in the lead up to retirement was eroding retirements.

“There are 180,000 people between the ages of 55 and 64 who are surviving on Newstart, which is only $15,000 a year, compared to $24,000 for the pension,” Mr Henschke said.

“Often they will start to take their super once they reach preservation age and erode their balances before they reach pension age.

“With the sharemarket having lost $200 billion in the coronavirus scare in the last couple of weeks, there are even more people worried about their retirements.”

Source: National Seniors

Retirement worries are a greater issue for women because they earn less than men, have lower super balances on retirement, and live longer on average, National Seniors found.

Although average superannuation balances have grown over the past decade from $109,500 to $263,700, there is also a downside.

People are increasingly indebted in the run-up to retirement, ISA found.

Although the average super balance has risen 140 per cent to $263,700, the average mortgage debt carried in the run-up to retirement had grown five times to $352,100 from $72,400, ISA found.

That was mainly driven by higher property prices.

One-third of retirees doing it tough

“There are about one-third of people on the age pension doing it tough – those relying on the basic rate of the pension and little else,” said Paul Versteege, policy co-ordinator with the Combined Pensioners and Superannuants Association.

“Also people on Newstart who are over 55 struggle because it’s 40 per cent less than the age pension,” Mr Versteege said.

Tony Dodson, an age pensioner, told The New Daily: “I was self-employed until I was 61 when the agency I contracted to was wound up and I was unable to get other work. Then my wife got ill and I had to care for her.”

“I started a transition to retirement pension, which used up my super.”

Eventually he went onto Newstart. After that, he was paid as his wife’s official carer.

“Now we live on the pension very frugally,” Mr Dodson said.

“When I hear about how the economy is weak, I think that they should increase Newstart, which is so low.

“The money spent would go straight back into the economy so everyone would be better off.”

Another pensioner, Margaret Cuddihy, told The New Daily: “I’ve been on the pension since I was 70 [she’s 82 now] and I find it very challenging.

“Food and insurance are particularly expensive.”

ISA CEO Bernie Dean said the struggles experienced by retirees showed “Australian workers can not afford any delay to the promised increases in the super guarantee rate (from 9.5 per cent to 12 per cent)”.

“With an ageing population and many retirees doing it tough, the only way for the government to defuse this ticking time bomb is to lift the super rate,” Mr Dean said.

The New Daily is owned by Industry Super Holdings

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