Tessa lives in a flat in one of the low-income suburbs of a major capital city. She works in a factory producing packaged goods. Like all employees, she receives a 9 per cent superannuation contribution, which is placed in a master fund by her employer.
At retirement age 65, under the basic 9 per cent compulsory contribution system, Tessa will show an improvement over her average pre-retirement living standard of 12 per cent. This 12 per cent improvement includes assistance in the form of social security and tax breaks.
If she has to retire or is retrenched at 55, under the basic 9 per cent compulsory contribution system she would experience a post-retirement standard of living that is 25 per cent lower than her average pre-retirement living standard level.
However, if she stays in employment until age 65 and contributes another 3 per cent to her employer's compulsory 9 per cent contribution, her post-retirement standard would be 40 per cent higher than her average pre-retirement living standard level.
Single middle-income woman
Jennifer enjoys a modest but affordable lifestyle in her own flat in a suburb of a major city. She commutes by train to work and has a small car for shopping and visiting friends.
At retirement, aged 65 under the basic 9 per cent compulsory contribution system, Jennifer would remain comfortable during her retirement. On average her living standard in retirement will be similar to what she enjoyed before retirement. If she retires or is retrenched at 55, under the basic 9 per cent compulsory contribution system she would experience a post-retirement standard of living that is 33 per cent lower than her average pre-retirement living standard level. If she retires at 60, the result won't be as pronounced, but a drop of 20 per cent in her standard of living will still have a detrimental impact.
If Jennifer stays in employment until 65 and contributes 3 per cent in addition to her employer's 9 per cent compulsory contribution, her post-retirement standard would be 26 per cent higher than her average pre-retirement level living standard level.
Single high-income woman
Retirement will mean a much-reduced lifestyle for Christine, who has enjoyed her better-than-average lifestyle as a result of her $50,000 a year position with an accounting firm. Although she owns her own townhouse and enjoys eating out occasionally, her lifestyle would change dramatically if she relies totally on the 9 per cent compulsory superannuation scheme.
If this is the case at retirement, aged 65 under the basic 9 per cent compulsory contribution system, Christine would experience a 19 per cent decline in her average pre-retirement living standard level.
Fortunately, Christine has been contributing a further 3 per cent to her superannuation above her employer's compulsory contribution since she started work after university, and now she is about to realise a much greater windfall in retirement.
If she stays in employment until 65 and contributes an additional 3 per cent to her employer's compulsory 9 per cent super contribution, her post retirement standard would be 9 per cent higher than her average pre-retirement living standard level.
Retiring or being retrenched at 55 would have a big effect on her standard of living. Under the basic 9 per cent compulsory contribution system, Christine will experience a post-retirement standard of living that is 44 per cent lower than her average pre-retirement living standard level.
Single very high-income woman
Cassandra is a young corporate lawyer who enjoys the high life and likes to live for the moment. She owns her own inner city apartment but has no other real savings.
If Cassandra was to only rely on the 9 per cent compulsory superannuation when she retires at 65, her standard of living in retirement would be considerably less, being 41 per cent lower than her average standard of living pre-retirement.
Retiring or being retrenched at 55 would have an even bigger impact on her standard of living. Under the basic 9 per cent compulsory contribution system, Cassandra will experience a post-retirement standard of living that is 61 per cent lower than her average pre-retirement living standard level.
If Cassandra enjoyed the high life a little less often and made additional contributions to super, she could enjoy a considerably better standard of living in retirement. If she personally contributed 3 per cent in addition to her employers' compulsory 9 per cent contributions, her post-retirement living standard would then only be 19 per cent lower than her average pre-retirement living standard compared to 41 per cent lower if she hadnt contributed. However, if she were to contribute another 6 per cent, her post retirement standard of living would be 8 per cent higher than her average pre-retirement living standard.
Single low-income male
John is a factory worker working in a sheet metal plant and is relying on his own efforts to have a happy retirement. At retirement aged 65, under the basic 9 per cent compulsory contribution system John would improve his average pre-retirement living standard by 10 per cent.
Work, however, is not as steady as it used to be and downsizing and other issues may force him out of the workforce at age 55. If he retires or is retrenched at age 55, under the basic 9 per cent compulsory contribution system he would experience a post-retirement standard of living that is 33 per cent lower than his average pre-retirement living standard level.
John's brother still lives in England, and he would love to make a trip overseas to see him, but on the basic 9 per cent retirement income it would not be enough to fund the trip. An additional 3 per cent contributed in addition to his employer's compulsory 9 per cent contribution would mean his post-retirement standard would be by 45 per cent higher than his average pre-retirement living standard level if he retires at age 65.
Single middle-income male
Although Phil's income isn't as high as he would like, at retirement aged 65 under the basic 9 per cent compulsory contribution system, Phil would still improve his average pre-retirement living standard level by 5 per cent.
His white-collar job as a clerical assistant in an office doesn't mean much to him or the management anymore and, probably after he retires, no one will replace him.
The danger is that his employer may retire him at age 55, and this would severely curtail his post-retirement plans. Under the basic 9 per cent compulsory contribution system, he would experience a post-retirement standard of living that is 36 per cent lower than his average pre-retirement living standard. This would be very difficult for him to deal with.
If Phil stays employed until 65 and personally contributes another 3 per cent on top of his employer's compulsory contribution of 9 per cent, his post retirement standard would be 39 per cent higher than his average pre-retirement living standard.
Single high-income male
Patrick's quality of life as a marketing manager means he has kept a close eye on his career and social life. He hasn't, however, spent much time thinking about retirement. He spends most of what he earns but he will have paid his apartment off and be reasonably self-sufficient by the time he retires.
Retirement, however, won't be all beer and skittles. At retirement, aged 65 under the basic 9 per cent compulsory contribution system, he would experience an average post-retirement living standard that is 16 per cent lower than his pre-retirement standard. He would be shocked by the result.
In his case, stopping work at 55 would mean that many of his plans would have to be changed. If he retired or was retrenched at age 55, under the basic 9 per cent compulsory contribution system he would experience a standard of living that was 47 per cent lower than his average pre-retirement living standard level. In a lifestyle sense, the eating out, coffees in the morning and afternoon, the theatre and cinema, would be rare unless, he had made plans to supplement his income.
If Patrick stays in employment until age 65 and personally contributes another 3 per cent on top of his employer's compulsory 9 per cent contribution, his post retirement standard of living would be 11 per cent higher than his average pre-retirement living standard level.
Single very high-income male
Andrew works for a large investment bank. He understands the importance of saving and wants to be able to enjoy a comfortable life in retirement.
He also knows the 9 per cent compulsory superannuation may not be enough. In fact, if he retires at age 65, under the basic 9 per cent compulsory superannuation system, his post retirement standard of living would be 35 per cent less than his average pre-retirement living standard level.
Knowing this, Andrew has been contributing an additional 6 per cent on top of his employers 9 per cent contribution. Doing so means he will be able to enjoy a standard of living in retirement that is 25 per cent higher than what he experienced before retirement.
Investment banking can also be very stressful. If Andrew was to retire or be retrenched at 55, under the basic 9 per cent compulsory contribution system his post retirement standard of living would be on average 60 per cent lower than it was before he retired.
Low-income couple with no children
Bob and Shirley enjoy a very modest lifestyle living in a neat three-bedroom home on a small block in the suburbs, close to its outskirts but closer still to Bob's work at a factory outlet. As a storehouse worker, he enjoys a modest but adequate lifestyle and enough money to pay his bills and service his six-year-old car.
Both Bob and Shirley work full time, counting the benefits of two incomes and the 9 per cent superannuation contribution. At retirement aged 65, under the basic 9 per cent compulsory contribution system, Bob and Shirley would suffer a 25 per cent decline in their average pre-retirement living standards.
Being forced to retire at 55, under the basic 9 per cent compulsory contribution system Bob and Shirley would experience a post-retirement standard of living that is 55 per cent lower than their average pre-retirement living standard.
If they stay in employment until age 65 and personally contribute another 3 per cent on top of their employers' compulsory 9 per cent contributions, their post-retirement living standard would still be 6 per cent lower than their average pre-retirement living standard compared to 25 per cent lower if they hadnt contributed. However, if they were to contribute another 6 per cent, their post retirement standard of living would be 15 per cent higher than their average pre-retirement living standard.
Middle income couple with no children
Anne and Roger, live in a townhouse in an inner-city suburb in a major city. Roger has a job as a transport manager with a trucking company and Anne works for a clothing retailer. This gives them a comfortable living, and they're looking forward to retirement. At retirement aged 65, under the basic 9 per cent compulsory contribution system, Anne and Roger would suffer a post-retirement standard of living that is 33 per cent lower than their average pre-retirement living standard.
If Anne and Roger retired or were retrenched at age 55, under the basic 9 per cent compulsory contribution system they would experience a post-retirement standard of living that is 59 per cent lower than their average pre-retirement living standard, yet their living expenses would be at the same rate as before.
If Anne and Roger stay in employment until age 65, and both personally contribute another 3 per cent on top of their employers' compulsory 9 per cent contributions, their post-retirement living standard would only be 12 per cent lower than their average pre-retirement living standard compared to 33 per cent lower if they hadnt contributed. However, if they were to contribute 6 per cent, their post-retirement standard would be 9 per cent higher than their average pre-retirement living standard.
High-income couple with no children
George and Jane have a three-bedroom house in one of the leafier suburbs of a major city. Most of George and Jane's earnings from their separate careers as graphic artists have gone towards paying off the house and the boat, but they've paid little attention to their retirement. They rely, to a great extent, on their compulsory superannuation.
They are in for a rude shock. At retirement aged 65, under the basic 9 per cent compulsory contribution system, George and Jane will experience a post-retirement standard of living that it 50 per cent lower than their average pre-retirement living standard.
Even though they will have a modest post-retirement income, their lifestyle stands to change considerably. One way round it is if they have other forms of savings, such as shares or property. Their situation becomes much worse if they retire or are retrenched at age 55. Under the basic 9 per cent compulsory contribution system, they will experience a post-retirement standard of living that is 70 per cent lower than their average pre-retirement living standard.
If they are both in employment until age 65 and personally contribute 3 per cent in addition to their employers' compulsory 9 per cent contributions, their post-retirement standard would then only be 12 per cent lower than their average pre-retirement living standard compared to 50 per cent lower if they hadnt contributed.
Very high-income couple with no children
Ken and Barbie are both highly successful models with a small terrace house in the trendier part of town.
Retiring at age 65, under the basic 9 per cent compulsory contribution system they will be confronted with a post-retirement standard of living 69 per cent lower than the average standard of living before retirement.
Even if they were to personally contribute an additional 3 per cent on top of their employers compulsory 9 per cent contribution, their post-retirement standard of living would still be 31 per cent lower than their average pre-retirement living standard.
Modelling can be a short-term career. If Ken and Barbie are retrenched at age 55 their lifestyle will be in serious trouble. Under the basic 9 per cent compulsory contribution system they will experience a post-retirement standard of living that is 85 per cent lower than their average pre-retirement living standard level.
Low-income couple with two children
Peter and Elizabeth have two children at high school. With the costs of uniforms, books and other materials, they struggle to make ends meet. Their superannuation is far from their minds in their late 30s, but soon the reality will hit. Peter's job as a telephone technician is a busy one, but does not carry a high salary, and Elizabeth has returned to full-time work.
They know the 9 per cent superannuation contribution will provide the bulk of their retirement income, but they also know that it will be tight. In retirement, they won't have the expense of the children's schooling and clothing.
At retirement aged 65, under the basic 9 per cent compulsory contribution system, Peter and Elizabeth will experience a 4 per cent decline in their average standard of living.
If they have to deal with retirement or retrenchment at age 55, under the basic 9 per cent compulsory contribution system they will experience a post-retirement standard of living that is 39 per cent lower than their average pre-retirement living standard level.
If they stay in employment until age 65 and personally contribute another 3 per cent on top of their employers' compulsory 9 per cent contributions, their post-retirement standard of living would be 18 per cent higher than their average pre-retirement living standard.
Middle-income couple with two children
Nick and Sandra, have a house in a thriving regional centre, their children are in primary and secondary schools, and, although they are mindful of the expense of having two young children, they have a reasonably comfortable lifestyle.
They haven't concentrated on their retirement. They understand that the 9 per cent compulsory superannuation is there to cover their retirement. Sandra works part time in a local conveyancing office as a clerical assistant, and this has enabled them to add more funds to their 9 per cent superannuation amount.
At retirement aged 65, under the basic 9 per cent compulsory contribution system, Nick and Sandra would experience a post-retirement standard of living that is 15 per cent lower than their average pre-retirement living standard Nick' job as a marketing executive with a large auto trader is steady, but with a contraction in the motor trade at the dealer level, he cannot dismiss the chance that he may be replaced with a younger man before he reaches 55. Sandra faces a similar dilemma. If they retire or are retrenched at age 55, under the basic 9 per cent compulsory contribution system they will experience a post-retirement standard of living that is 44 per cent lower than their average pre-retirement living standard.
If they both stay in employment until age 65 and personally contribute another 3 per cent on top of their employers' compulsory 9 per cent contributions, their post-retirement standard would be 10 per cent higher than their average pre-retirement living standard level.
High-income couple with two children
David and Sarah have careers that have been good to them. They live close to the city and have two cars and a house. At retirement aged 65, under the basic 9 per cent compulsory contribution system, they will suffer a post retirement standard of living that is 24 per cent lower than their average pre-retirement living standard.
As Sarah has worked full time in human resources positions, except for six years of part-time work when the children were young, her 9 per cent contribution will assist in making their lives more comfortable in retirement. But unless they can afford to make up the difference between their pre-retirement lifestyle and the retirement living standard, they will suffer an expectation gap.
Retiring or being retrenched early would create a stumbling block for David and Sarah. Many employers in legal firms are making way for newer employees by retiring the old ones, and David's position, although senior, may not be safe. Sarah is in a similar position. If they retire or are retrenched at age 55, under the basic 9 per cent compulsory contribution system they will experience a post-retirement standard of living that is 49 per cent lower than their average pre-retirement living standard.
However, if they stay in employment until age 65 and contribute another 3 per cent to their employers' compulsory 9 per cent contributions, their post-retirement standard would be similar to the standard they enjoyed before retirement.
Very high-income couple with two children
Geoff and Anne-Marie have been very successful with their consultancy business. They have a big house in one of the leafier suburbs and the kids have gone to the best private schools.
Unfortunately, they will find it hard to maintain this lifestyle in retirement. At retirement at age 65, under the basic 9 per cent compulsory contribution system, they will have to adjust to a post retirement standard of living that is 61 per cent lower than their average pre-retirement living standard.
Even if they were to make additional contributions they will still need to adjust their lifestyles. An additional 3 per cent contribution on top of their employers compulsory 9 per cent contribution will give them a post-retirement standard of living that is still 31 per cent lower than their average pre-retirement living standard.
Consulting can be a very fickle business. If their business dried up and Geoff and Anne-Marie were forced to retire at 55, they would have to adjust to a very different lifestyle if they were to rely on the 9 per cent compulsory contribution system alone. They would suffer a post-retirement living standard that is 80 per cent lower than their pre-retirement living standard.
Case study notes
These case studies are based on statistics provided. Any similarity with any person living or dead is purely coincidental and these case studies are designed to be purely fictional in nature.
These estimates are for people who are home-owners and who rely on superannuation and any entitlement to the age pension for their retirement.
Their future retirement incomes are calculated on the basis of a 1 per cent annual growth in real earnings and corresponding indexation of the tax and age pension systems. The adequacy of their retirement incomes is looked at in terms of living standards after taking account of their particular circumstances and the costs they face. This is done in two ways:
by comparing their living standards in retirement with a benchmark figure
by comparing their average living standards in retirement with their average living standards from the age of 25 up until retirement
The estimates are based on people who are employed full-time, though married women have a period of part-time employment when they have young children.
Children are disregarded in the estimates after they reach the age of 16 years.
While the preservation age for superannuation is being raised to the age of 60 years, in order to focus on the impact of retirement age, this is not covered in these simulations, which allow access to superannuation from age 55.
