The following quote comes from the CCH Australia website. It outlines the results of recent studies about the money needed to fund retirement and gives two website addresses where the information can be directly accessed along with a retirement calculator based on the research.

Quote starts:

" New research identifies key retirement costs
Tuesday, 03 February, 2004 Print
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How much it actually costs Australians to have a comfortable lifestyle in retirement has been identified for the first time by new research from ASFA (the Association of Superannuation Funds of Australia).

The Westpac-ASFA Retirement Living Standard benchmarks the annual budget needed by Australians to pay for a comfortable standard of living in the post-work years. It will be updated quarterly to reflect inflation.

The research provides detailed budgets of what singles and couples would need to spend to have either:

a modest lifestyle in retirement (better than the Age Pension, but still only able to provide for basic activities); and
a more comfortable retirement lifestyle (enabling an older healthy retiree to have a broader range of leisure activities and a good standard of living).
"The Age Pension is an indication of what you can survive on, but most people want to do more than just survive," said Paul Lilley, Westpac's Group General Manager Sales & Service at the launch in Sydney.

"We know that babyboomers and subsequent generations generally want to maintain very active and social lifestyles when they're retired. The Westpac-ASFA Retirement Living Standard provides a clear and objective standard for Australians to gauge their own needs in retirement."

The research examines both "modest" and "comfortable" budgets for a retired single person and a couple respectively. For some budget items two can live as cheaply as one, but for others costs go up with the size of the household. The result of this analysis is:

to achieve a comfortable retirement lifestyle, a couple needs an annual income of $43,350, and a single person needs $32,800; and
to achieve a modest retirement lifestyle, a couple will need $23,550 each year, and singles $16,930.
"The extra expenditure allowed in the shift from 'modest' to 'comfortable' adds a lot to enjoyment of retirement, in particular personal comfort, better health care and our ability to more fully participate in modern Australian society," said Philippa Smith, CEO of AFSA.

"The detailed budgets show that while the 'comfortable' lifestyle allows for more activities, better personal care and home maintenance, it is not extravagant.

The budgets were drawn up by first examining what Australians spend their money on, then precisely costing the items. These initial budgets were tested on focus groups of retired people living comfortably, to determine what was appropriate and what was less relevant. The final budgets reflect their input.

This work was undertaken in conjunction with the Social Policy Research Centre of the University of New South Wales, a world leader in this type of research.

The Westpac-ASFA Retirement Living Standard can be found at both the Westpac (http://www.westpac.com.au) and ASFA (http://www.superannuation.asn.au) websites. A new retirement calculator based on the research is available at http://www.westpac.com.au along with details of the modest and comfortable budgets respectively, to help people evaluate which standard of living they want to aim for."

Quote ends.

Cheers,
Catron

Catron

Were these annual amounts quoted before or after income tax?


Cheers

LJ

Hi LJ,

I have no additional information sources to those given in my first post but as the sums shown are all based on actual budgeted expenditure I assume they represent after tax amounts.

Details of the make-up of each sum can be accessed on the www.superannuation.asn.au site previously mentioned.

Cheers,
Catron

The following summary of recent research on Retirees' perceptions of adequate income change is taken from the CCH Aust website:

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"Retirees' perceptions of an adequate income have moved up, according to research commissioned by the Association of Superannuation Funds of Australia.

The National Survey on Community Attitudes to Saving for Retirement by ANOP Research Services found that seven in 10 non-retired people estimate they will need a minimum annual income of at least $30,000 pa to maintain an adequate lifestyle in retirement. This is a substantial shift from 2001 research, when almost a quarter of retirees said they could live on $20,000 pa.

Philippa Smith, ASFA Chief Executive Officer of ASFA, said the findings reflect the fact that the first wave of babyboomers, who have higher expectations, are starting to retire. It also reinforces the quantitative research findings of the ASFA-Westpac Retirement Living Standard index, which indicated $34,000 was needed by a single person and $43,000 for a couple to have a comfortable lifestyle in retirement.

Smith said the message about the need to save more for an adequate retirement is starting to get through. Back in 2001, one in three believed their current savings would be adequate to fund their retirement expectations, whereas in 2004 only one in eight are similarly deluded.

Other survey findings include:

the number of retirees feeling disappointed in retirement is increasing, with financial security emerging as a key determinant. In 2001, one out of four people reported unmet expectations, in 2004 it is one out of three.
seven in 10 recognise 9% compulsory super is not enough to provide an adequate retirement income.
about half do not believe their current savings will achieve their desired standard of living in retirement.
more people expect they will receive the age pension.
eight in 10 would consider working longer to fund their retirement.
six out of 10 nominate selling or downsizing their homes to fund retirement, compared to the one in six who currently do so.
70% believe government needs to do more about the ageing population, and encouraging people to save for retirement was amongst the top three suggestions, along with aged care facilities and improving the health system.
providing adequate incentives to save for retirement was seen as the government's most important priority to help ensure an adequate income in retirement. Out of five options, reducing the super contributions tax and providing co-contributions for lower and middle income earners were the highest ranked alternatives. Ensuring super fund fees are reasonable and making it easier to work while accessing super are middle order priorities. Encouraging people to work until age 70 receives little support.

Smith said the research flags a significant shift in Australians' attitudes to savings and retirement. People are less under the "she'll be right" illusion about retirement and know compulsory super is not going to be enough."
Quote ends

Cheers,
Catron

Gone

Hi Sk,

Glad you found it interesting.

Cheers,
Catron

Hi All

There must be an "ideal" amount of super to have aquired on retirement.

The Wealthy
Obviously, if you have a large amount and invest wisely there is no need to worry about the Government pension and you would be a self funded retiree with the odd benefit handed out for being self funded.

The Average
You have an amount that will not be enough to be fully self funded and top up with some or full payments from government pension.
Ideally try to structure so maximise government payment and minimum drawdown of capital to achieve the required amount to retire on.(approx $30,000 to 50,000 per year)

Others
No super and rely totally on aged pension and odd jobs and any benefits available.

What i would like to look into is the Average Group with some differnt senario's.

What is the maximum income from AP that can be achieved before the aged pension payment of ~$360 per week starts reducing?

Is the AP amount part of the assets test? (prior Sept 20 2004)
What %age of the AP payment is deemed as income?

The max assets apart from the home is less than $217,000 (couple)which includes car,caravan,boat etc which is below the max before pension payments start to be reduced?(depends on AP Balance inclusion ?)

Assuming no other income and a credit card for emergency cash requirements.

I am interested because the situation may arise that some friends will need to sell their house and realise some profit when moving into a retirement villa where they can move into nursing home facilities as time moves on.
Ideally they may need to arrange their affairs prior to sept 20 so the realised cash from the difference in house sale and the cost of retirement unit will poossibly reduce the pension payment.

Basically what is the best income achievable while recieving the full goverment pension payment for a couple.
Any info appreciated or reference to source.
Cheers Karm

G'day karm,

These sites may be of use to you in fooling around with some numbers.

http://www.mlc.com.au/calcs/pensionCalc.htm

http://www.unisuper.com.au/education/mo ... odelAP.cfm

Cheers

Thanks Judd
The mlc calculator is very handy.

Is there anywhere i can get the "Annual Deductible Amount" for a cash input to an AP (non-complying income stream)
and also an annuity (complying income stream)

Have searched and do not seem to be able to come up with an answer or table.
The annuity (complying) is not considered in the pension assets test for centrelink purposes but i cannot find out the annual deductible amount to be subtracted from the annuity income.

Cheers karm

G'day Karm,
I think you will find it is the amount of "undeducted contributions" ( after tax has already been paid funds) divided by the life expectancy of the contributor.

Best to check it out though with the ATO .
Not the full story but you will get a bit of an idea of how it works through this site
http://www.ato.gov.au/SearchResults.asp ... ble+amount

This sets out what happens if one wants to commute part of an allocated pension.

Thanks Pedro and Judd
Difficult to find the right answers but understand a little more about the process.

From some calcs using the MLC calculator mentioned by Judd above there is a approx $140,000 that can be held (without an AP or Annuity) and still recieve the full pension.Assuming about $65,000 in assets (car,caravan,furnitire etc) other than the family home.(note that most would value these assets a lot lower for age pension purposes but in this case it does not make a lot of difference as the "deemed"earning amount from the $140,000 is what will reduce the age pension payment)

Some quick calcs assuming a "reasonable" average return of 6.5% would mean additional income from the $140,000 invested would give $9100 per year.(deemed to earn ~4 or 5% for aged pension eligibility calcs)
The full pension for a couple of ~ $20,000 per year added to the $9100 income would give a yearly income of $29,100 /year or $560 / week.
(no tax return required under ~ $16,000 per person , ~$32,000)

Assuming you do not qualify for any age pension income,the full age pension payment for a couple is equivalent to ~$20,000/6.5% (allowing an average return of 6.5%) which gives an investment balance of ~ $300,000.

What i deduce from all this is, you do not need to have a large amount of super to recieve an average sought of living income especially if you retire owning your home and other assets(cars etc)

What is the cost of recieving a higher income, by saving into superannuation during your working life to accumulate much more than the $140,000 dollars in super.(net of home,furniture,cars ,caravans etc)

To recieve ,what i would assume, is a very comfortable income of say,$50,000 per year in retirement, how much more super do you have to accumulate than ~$140,000,knowing that ,at 6.5% return,the full pension payment is worth about $300,000 dollars as an investment.

I have not allowed for inflation in any of the above assumptions but my point is, the aged pension is a powerful equalizer in retirement for those with,what i assume,are not large amounts of super.(100,000 to 200,000 dollars)
Are you much better off having $400,000 or $500,000 ? as far as income recieved.

Annuity(complying) is 100% not asset tested before Sept 20 / 2004.(problem is,once in the annuity,the lump sum will be gone in ~15 or 20 years which may or may not be a consideration)
AP are 100% asset tested.

Income streams from these two investments have a deductible amount which reduces the income recieved for age pension calcs.
Income for aged pension calcs is the income recieved - the deductable amount.

The deductable amount is as far as i can determine for "clean" super money(under RBL) or a cash investment into the AP or Annuity is the amount invested, divided by the life expectancy.



quote from ato website

Deductible amount

A member receiving an allocated pension can claim a deductible amount if the pension has an undeducted purchase price (UPP). Generally, the UPP is the amount a member contributes towards the purchase price of the pension for which they did not claim a tax deduction. Each year, that part of the member's pension received which represents a return of a portion of the UPP is deducted from their taxable pension income. This tax free part is called the deductible amount.

The annual deductible amount for an allocated pension/annuity payable to one person, is calculated as follows:

UPP – Residual Capital Value (if any)

Life Expectancy*



*The life expectancy factor that will be applied is determined from the Australian Life Tables, using the recipient’s age at the time the pension commences to be payable. The life table most recently published at the time the pension commenced is used.

However, in the case of a reversionary pension, the relevant number used to calculate the deductible amount is based on the longer of the life expectancies of the recipient or reversionary beneficiary.

After the 20th of Sept 2004, the annuity will not benefit from the 100% exemption for the asset test.

Cheers Karm

Hi All, esp Karm,
Hope this sheds some more light on the issue of TAPs.
For those considering retirement incomes and/or the new TAPs, Daryl Dixon's article in Sun Herald 12th Sept, and same article on his web site, may assist. But the deadline is becoming perilously close should TAPs be the preferred strategy, ie 20th Sept, 2004.
Cheers, Suzy