How much you can save on your own with your retirement?
The latest research suggests you should spend less on your retirements.
A study of 1,000 Australians found that in the 10 years to 2020, people who were saving more than $40,000 a year were saving only 2.8% of their income.
This meant they had to save more than a third of their annual income to cover the costs of a $20,000 monthly disability pension.
“In other words, people were saving for a very small portion of their total income to get their pension, and that meant the cost of living for the average person was increasing by more than 25%,” says study author Dr Stephen Jorgensen, from the University of Melbourne.
“The fact that the cost is going up at a rate that we’re seeing today is really worrying.
We think the cost should be growing.”
He says it could be even worse for people with high health care costs.
“People who are spending more on health care are having higher healthcare costs because of the higher costs that are being borne by their insurance and doctors and hospitals,” he says.
“If they’re saving less, then it might mean that their health care cost is getting worse.”
Dr Jorgenson says it’s difficult to estimate how much the increase in health care spending will cause people’s pension payments to decline over the next decade.
But it’s likely to be a significant one.
The number of Australians who are claiming a disability pension, which pays for a part of your annual living expenses, has increased by more that 200,000 over the last 10 years.
This includes people who have been living with a disability for longer than two years, people with multiple chronic conditions, or people with cancer or heart disease.
The figure for the next 10 years is expected to be around 1.2 million people, a rise of more than 600,000.
But for many people, the increase could be offset by savings.
“Our advice would be to think about it as a retirement, not as a spending decision,” Dr Jurgensen says.
If you are already saving more, he says it might be worth investing in a low-cost, short-term investment.
“A one-off investment could have a positive impact on your overall spending and saving, but it won’t necessarily help you save more,” he adds.
“And if you’re in a lower income bracket, that investment may not be the best choice.”