Australians are being told they will need $595,000 to retire comfortably as pension expenditures for the elderly will decline over the next 40 years.
The Treasury Department’s Intergenerational Report, released on Thursday, predicted that Australia’s budget deficits would increase from the 2040s – leading to fewer social services available to the elderly as the National Disability Insurance Scheme, healthcare and defense would consume more resources.
It predicts that old age pension spending will fall even if the number of Australians aged 65 and over doubles between now and 2063 and the number of Australians aged 85 and over triples.
That would happen as Australians became even more dependent on their pensions to fund their retirement.
The Association of Superannuation Funds of Australia now recommends that one person, receiving the retirement pension at age 67, needs $595,000 to retire comfortably.
That’s more than double the average account balance of $211,996 for men ages 60 to 64, and the equivalent of $158,806 for women, IRS data shows.
Australians are being told they will need $595,000 to retire comfortably as pension spending for the elderly will fall over the next four decades (pictured is a stock photo)
Those more common superbalances would only fund a modest retirement, without the vacations abroad and a new car every few years.
For couples, ASFA recommends $690,000 in retirement funds is needed for a comfortable retirement.
ASFA deputy director Glen McCrea said cost-of-living pressures have pushed up the cost of living for pensions.
“Retirees’ budgets have been under significant pressure for nearly two years due to the high cost of essential goods and services,” he said.
The Treasury Department’s Intergenerational Report predicted that old-age pension spending would fall from 2.3% of gross domestic product today to 2% in 2062-63 as Australians become increasingly dependent on their super-economy.
“Without pensions, old-age pension spending would be a fast-growing component of government spending (along with defense, elder care, health care, the NDIS, and interest payments on debt),” the report said.
This would happen if the number of people aged 65 and older more than doubled to 9 million people, among a projected population of 40.5 million over four decades, compared to 26.3 million today.
Those over 85 would triple and those over 100 would sixfold.
In 2063, today’s youngest Millennials would turn 67 and be eligible for the old-age pension under the existing rules for those born since 1957.
The Treasury also expects deficits to be the norm, despite posting a surplus for the first time in 15 years for 2022-2023, and the first for Labor at the federal level since 1989.
“Despite recent measures that have improved the short-term fiscal position, government debt-to-GDP remains high by historical standards, long-term expenditure pressures are increasing and the revenue base is shrinking as the population ages,” the report said. .
The Treasury Department’s Intergenerational Report, released on Thursday, predicted that Australia would have larger budget deficits from the 2040s, leading to fewer social services available to the elderly (pictured is Treasurer Jim Chalmers).
Budget deficits were expected to widen from the 2040s ‘due to growing spending pressures’.
Treasurer Jim Chalmers said an aging population would put pressure on the budget.
“The 2020s should mark the end of complacency,” he told the National Press Club in Canberra on Thursday.
“As our population ages, this will also present challenges.
“Challenges to our budget and challenges to growth.
“As we get older, there will be a smaller proportion of people of working age, which will put pressure on our tax base.”
A falling birth rate and moderation in immigration levels from record levels of nearly 400,000 would see Australia’s average annual population growth rate slow to 1.1 per cent over the next four decades, down from its high of 1.9 per cent from last year.
ASFA’s June quarterly report, released on Thursday, recommended that a single Australia would need $50,207 a year for a comfortable lifestyle and $31,867.31 a year for a modest lifestyle after retirement.
A comfortable lifestyle is defined as sufficient for daily necessities such as groceries, transport and home repairs, for someone who owns their home, plus money for the occasional restaurant meal, an annual holiday in Australia and an overseas trip every seven years .