Retirement trap hurting saving Aussies
According to BetaShares, retirees who lift their savings to between $350,000- $600,000 may ironically see their income diminish.
BetaShares senior investment specialist Dr Roger Cohen said, “Common wisdom tells us that accumulating more savings through our working lives should result in higher income in our retirement years.”
“However, our analysis shows that, for certain people, under the current system, accumulating more money can actually produce the reverse.”
The current retirement system in Australia sees retirees drawing income from a combination of superannuation, the Age Pension and external assets.
The pension is means-tested, with the level of entitlement calculated using an income test and an assets test. These entitlement levels and associated reduction in the pensions are the primary drivers behind the “trap”.
More specifically, for an individual, there is an income range between $174 and $2,026 per fortnight, where for every additional dollar earned, the pension is reduced by 50 cents. This effectively halves the value of additional earnings for retirees in this range.
24 January 2020