Retiring with a million dollar in your bank account is something that’s desired by a lot of Australians, but those who’re actually expecting to have $1 million by the time they retire are in for a shock, according to one of the leading providers of retirement incomes.
Jeremy Cooper, a superannuation industry veteran and chairman of retirement income at Challenger, notes that a typical $1 million nest egg was used to buy a lifetime income and with the current interest rate environment, you’re looking at $1297 a fortnight, which roughly the same as a government pension.
Assuming that you’ll have $500,000 or even $1 million in super leading to a comfortable retirement can be suspect, given the current environment, states Cooper.
A comfortable retirement can cost more because $1 million is the fair price for the age pension with today’s interest rates. An individual is looking at an income of $33,717 a year for that $1 million. This is the brutal reality, Cooper points out.
Cooper’s statements are based on the government’s intergenerational report wherein by 2055, Australians’ life expectancy could climb to 95.1 years for men and 96.6 years for women, compared to today’s 91.5 and 93.6. This calls the need for more retirement planning.
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What I think about retiring comfortably
It just goes to show that the current low bond and interest rates can be a big factor that can affect the returns of investors and many of whom are preparing for a lump sum windfall instead of a steady income.
The way things are now, we are currently on the quest to ensure that our super taxes are equitable and that we are in danger of facing heavy collateral damage to a large group of people who we intend to help. These people are the middle income households hoping to accumulate a large enough nest egg that will self-fund a reasonable yet comfortable retirement.
$1 million is not a comfortable amount for retirement and that assets below $2.5 million shouldn’t be taxed in order to boost savings.
