Some of you may have seen the article that was published in the Age yesterday which focussed on the fact that having $1 million in superannuation won’t be enough to fund retirement. The commentary came from ‘Superannuation industry veteran and chairman of retirement income at Challenger, Jeremy Cooper.’
Jeremy Cooper is employed by Challenger who are a provider of retirement income stream products.
We’re a bit confused as to what message Mr. Cooper is trying to relay here?
In the article we are told that a person with $1 million invested into a lifetime annuity can expect no more than $1,297 per fortnight ($33,722 per annum).
If we were to assume a couple at the age of 65 wanted to retire, their life expectancies at this stage in their lives is 18.5 (male) and 21.6 years (female). For the sake of illustration, lets assume an average life expectancy of 20 years. If we held $1 million in a bank account and earned no interest at all, this couple would be able to draw $1,923 per fortnight ($50,000 a year), being the use of their own capital.
So with this in mind, why would you buy a product being sold by Mr. Cooper and therefore Challenger?
The article also makes no mention of the fact that income derived from personal investments (below the assets test) would be supplemented by an age pension payment from the Government. Whilst we know that the current age pension is being reviewed and may be scaled back for wealthier Australians, the Government has in no way mentioned that the age pension will be completely abolished and not support elderly Australian’s. Therefore why is this payment being completely ignored within this article?
These statements which were widely publicised throughout media centres yesterday (I actually caught a small snippet of this topic being spoken about on ABC radio on the way to work), are irresponsible, and generic in nature. They do not take into account personal circumstances, they do not provide accurate information and like all other forms of poor journalism, work on the element of fear to sell advertising space in papers, and on radio and television stations that they are produced for.
If you wish to further understand how your retirement income should be structured, and how it will be able to provide for your ongoing living needs, please seek professional advice as opposed to relying on information that is irrelevant and inaccurate to your specific needs.