We all know that we should try to save as much as we can for retirement. But what happens if that’s not enough?
Quite simply, you will need to modify your lifestyle to meet your ability to pay for it. This could mean less leisure activities and a much simpler retirement than could otherwise be possible, making it difficult to sit back and enjoy retirement.
Not having enough money for retirement will be a reality for far too many Australians. Right now, only a third of retirees are living on what the experts call a comfortable level of income, with roughly half of Australians over 65 still reliant on the age pension. SOURCE
Whilst you may have grand plans for travel, leisure and living the good life in retirement, with no savings how easily will these things be within your reach?
Below are some examples of how your retirement may look if you do not have adequate savings behind you.
You Will Be Dependant On The Aged Pension
More and more older people are finding themselves in a situation where they reach retirement age without enough savings. With no savings you will have no choice other than to rely on the Age Pension to get by in retirement. Depending on the lifestyle you want, this can be tough.
A single retiree who qualifies for a full government pension can expect to receive approximately $24,081 a year, including the maximum pension supplement and an energy supplement. A couple can expect to receive approximately $36,301 a year. SOURCE
When you’re living on the aged pension, every dollar counts. Being reliant on the aged pension you also have to face the reality that your entitlements do not keep pace with the cost of living. Rising medical, energy, living and food costs mean many age pensioners go without basics and juggle bills from week-to-week, so that they can simply afford to survive.
You Might Need To Downsize
Housing can be one of your biggest expenses. Renting, paying off a mortgage, or paying for upkeep and rates on a property you own can deplete your finances in a hurry.
Should your savings not be able to cover your retirement, your only option will be to downsize(assuming you own your home in the first place). This will mean selling the house that you have worked so long to pay off. You might need to sell possessions and cars in order to live a smaller, more manageable life.
By downsizing you will be able to generate some extra money that can be stored away for a rainy day.
If selling your home isn’t an option you may need to consider bringing in a tenant or house mate, whether it’s a single renter residing in a section of the house or a couple to share your space with. This can be a big change to your current way of life, but you will instantly cut many of your bills in half.
Your Lifestyle Will Change
Living the good life means something different to everyone, but if you’re managing on a fixed income, such as the age pension, you may have to re-evaluate your priorities. On the aged pension you will only be able to afford fairly basic activities. Some lifestyle changes may include:
- Basic Clothes
- Less heating in winter/less cooling in summer
- Only taking part in no cost or very low cost leisure activities
- No car or, if you have a car, it may be an older model and you may struggle to afford repairs
- No private health insurance
- No budget to fix home maintenance problems
Of course, being happy and healthy are as important as having money, but constantly struggling to balance your bank account, could make achieving either difficult.
Unless you have a secret plan to get free money or you’re lucky enough to win the lottery, not saving enough for retirement will leave you scrambling to get by in old age.
Fortunately, it doesn’t have to be this way. Instead of burying your head in the sand, you can get serious about retirement instead. By making your retirement a priority, you can be confident you’ll never outlive your money.
About Massey Financial Advice
I am a Brisbane-based Financial Adviser with more than 14 years of experience working with professionals to achieve financial freedom. I have clients across Brisbane, including from Ashgrove, The Gap, Kenmore and Chapel Hill.
Sometimes people don’t really understand their financial situation – whether that be their personal cash flow, wealth creation or retirement plan, and this puts their lifestyle at risk. I partner with professionals so that they feel empowered to make the best financial choices for them, their family and their career.
A great first step to preparing for your retirement is to book a cost and obligation free Financial Gap Strategy Session by clicking the link below. This is a cost and obligation free phone call at a time that suits you to discuss what you are working to achieve and discuss how I may be able to help.
If you would care to share your experience with me, please comment below!