Feb 13, 2024

No super, No Life!

I was travelling in Japan on a family holiday recently and browsing a stationary store came across a number of pictures with the caption “No Super, No Life”. This is probably more relevant in Japan where the annual basic aged pension is approximately ¥950000 (Approximately A$9,500). This would definitely be tough in retirement where an individual didn’t have a personal individual retirement account to supplement the aged pension. It would simply be impossible to live off the basic aged pension which is a major reason why a larger portion of the elderly participate into the workforce.

In Australia the aged pension is higher, however Australia does have higher living costs. Overall Australia likely provides a better standard of living for those living on the aged pension. Coupled with the aged pension, Australia has one of the most generous superannuation schemes in the world and with long term planning can provide generous legal tax free income in retirement for the rest of ones life.

If you have $1.7m in superannuation in retirement and invested at a current interest rate of 5.4%, this would provide you with $91,800 of income per annum for the rest of your life. In addition to this the $1.7m of capital is preserved and able to be passed on to your love ones. If you wanted to withdraw more so that you had no capital left after 35 years, you would be able to withdraw $109,116 per annum. This is assuming the investment is in simple term deposits and cash investments.

If you compare this with AustralianSuper returns in a balanced option which averaged 7.94% for the last 10 years the numbers are staggering. If you were simply living off investment income this would provide you with an annual income of $134,980 with you initial investment intact. If you were to drawdown on your investment over 35 years, the annual withdrawal would be $144,978.11

There are only two ways to increase your superannuation and this can be done through contributions or investment returns.

 Whilst in Japan its “No Super, No Life, in Australia its “Super, for a better life”

Speak to one of our accountants if you have any questions about the changes in tax for 2023.