Amanda Hardy Lai, Author at Retirement Essentials

What does annuity mean for you?

Annuity rules explained

When we talk about retirement income, Account-Based Pensions (ABPs) often take centre stage because they’re the most common retirement income streams. But they’re not the only option.

Lifetime income streams, such as annuities provide guaranteed income for life, protecting against the risk of outliving savings. Yet very few Australians retirees choose them – only 3.5% of pension assets are in annuities, compared to 84% in ABPs. (APRA, 2023m as cited in Treasury 2023)

Why don’t more retirees choose annuities?

The Treasury’s 2023 discussion paper on superannuation in retirement noted several key factors which contribute to the low uptake:

Pricing and longevity risk: Australians are living longer than expected, making annuities more expensive to purchase and provide.

Lack of flexibility: Many retirees worry about locking up their savings and not having access to funds for unexpected expenses.

Upfront cost: The one-time purchase price can seem high, even though it guarantees lifelong income.

Helping Gary feel more financially secure

by Amanda Hardy Lai | Retirement Advice

Amanda Hardy Lai is a problem solver at heart. and that the world of investment was actually really interesting. Fast forward a couple of decades and Amanda is now the mother of two teenagers living near the coast in suburban Melbourne. She loves swimming and pizza. And she loves solving problems even more!

‘The best thing about my role at Retirement Essentials is engaging with people.’

Amanda is also responsible for many of the explanations in our weekly enews:

‘Sharing stories and explanations is a big part of my job. I love being the person who can break down complex information and make it easier for others to understand.’

One common situation when planning for retirement is that many people assume they won’t qualify for Centrelink benefits – especially if they’ve built up a good amount of super. But the reality is, eligibility rules are complex, and small adjustments can make a big difference.

How much is enough for a comfortable retirement?

by Amanda Hardy Lai | Planning for Retirement

Last week, I discussed the most common retirement questions our members ask during strategy consultations with our advisers. One of the big ones is: ‘Do I have enough? Sometimes that thought is closely linked to ‘Do I have enough – yet?’

The real question isn’t just about whether it’s enough, it’s more likely, ‘How can I make my savings last?’

Your superannuation balance and investments, spending levels, Age Pension entitlements, and investment choices will all play a role in sustaining your income over time.

Understanding retirement standards

The Association of Superannuation Funds of Australia (ASFA) provides guidelines to help individuals plan for retirement, which they update quarterly. As of the September quarter in 2024, ASFA’s Retirement Standard suggests that the following is needed:

For couples:

Comfortable lifestyle: Annual spending of $73,031, requiring approximately $690,000 in superannuation savings at retirement.

Modest lifestyle: Annual spending of $47,475, requiring approximately $100,000 in superannuation savings at retirement.

For singles:

Comfortable lifestyle: Annual spending of $51,814, with a recommended superannuation balance of around $595,000.

Modest lifestyle: Annual spending of $32,930, requiring approximately $100,000 in superannuation savings at retirement.

These figures assume retirees own their homes outright and are eligible for a part Age Pension.

By comparison, the full Age Pension rates are currently:

Couples (combined): $44,855 per year

Singles: $29,754 per year.

ASFA provides detailed budgets for both of these ‘modest’ and ‘comfortable’ retirement lifestyles. A modest lifestyle allows for a slightly better standard of living than the full Age Pension, but still only covers basic needs – requiring a modest superannuation balance of $100,000.

In contrast, a comfortable lifestyle requires significantly higher super savings to afford a higher standard of living, with additional spending on leisure, private health insurance, household upgrades and occasional travel.

According to ASFA’s latest update on superannuation balances, around 30% of retirees currently meet or exceed the comfortable standard. Their research indicates that, by 2050, approximately 50% of retiree households will reach this level.