New retirement standards have been proposed by Super Consumers Australia with the goal of providing Australians with improved guidance on spending levels and savings targets.
The firm is seeking consultation on its research which details the savings targets needed for individuals when they reach age 65 depending on their level of spending in retirement.
“Our goal is to develop trustworthy retirement targets that give people a solid ‘rule of thumb’ on what they’ll need to save to maintain their standard of living in retirement,” said Super Consumers Australia director Xavier O’Halloran.
“These targets are designed to get people to engage with simple information and kickstart their retirement planning journey.”
Super Consumers Australia pointed to a key finding from the Retirement Income Review that found that Australians were not spending down their savings in retirement due to the complexity of the system and a fear of running out of money.
“These standards are designed to address that complexity and uncertainty,” said Mr O’Halloran.
“People can trust these savings targets because they are based on what actual retirees are spending in retirement and give people an idea of what they can confidently spend until age 90.”
Using data from the Australian Bureau of Statistics and financial hardship data, Super Consumers Australia outlined the savings needed for both single and coupled homeowners who, in total, account for 84 per cent of retirees.
According to the firm’s targets, a couple aged around 57 would need to reach a savings balance of $409,000 by age 65 to be able to afford an “average” level of spending of $2,385 per fortnight in retirement.
The required savings balance grows to $1,034,000 for couples that will have a “high” level of spending in retirement ($3,077 per fortnight) and drops to $115,000 for a “low” level of spending ($1,846).
Meanwhile, couples aged around 67 would need to have saved $369,000 by the time they had reached 65 to be able to afford to spend at an average level of $2,115 per fortnight.
“We heard repeatedly in the research that people had grossly inflated ideas of what they needed to retire,” Mr O’Halloran said.
“People chasing inappropriate targets can end up with a much lower standard of living if they over save or don’t spend down as much as they can afford in retirement. Having credible targets, based on actual need, means people can confidently spend and get on with enjoying their retirement.”
