Retirement reality check: the age pension is not a plan


We have all heard the saying that if you fail to plan, you plan to fail but how many truly understand the meaning of this statement. Because in my opinion, the importance of planning is understanding the impact of what you are focusing your attention on.

Australia is a country with one of the highest levels of personal debt and we know that the main source of income for around 50% of retirees is the government pension. So, what exactly are Australian's planning for if they continually end up in this situation.

Unfortunately, many Australians mistakenly believe that the pension is a retirement plan. However, it was set up as a safety net by the government to support those who have not really planned for their retirement, which explains why it is set at levels that are insufficient for people to survive.

pension is not a retirement plan

In reviewing the recent investor survey by the Australian Securities Exchange, the number one financial goal for 50% of those surveyed was to go on a holiday. Around 25% also indicated that their goal was to save for something big while 13% indicated they had no specific personal or financial goals.

On a good note, 34% indicated they wanted to pay down debt or become debt-free while 32% indicated their goal was to get their finances in order. While the survey included investors from all ages, one figure that was quite interesting, but not surprising, was that only 12% said their goal was to plan for retirement, which explains why so many Australians are in debt and on a government pension.

This survey also highlights that what we focus on may not be what we should be planning for. Retiring debt-free and on a comfortable income is very achievable for anyone with a little dedication and planning. You just need to follow the three laws of wealth creation: spend less than you earn, invest wisely and leave it alone to grow.

Best and worst performing sectors this week

Once again, Information Technology is up 2.26% followed by Industrials and Materials, which are just in the green. The worst performing sectors include Utilities down 2.33%, while Communication Services and Consumer Staples are down around 1%.

Looking at the ASX top 100 stocks the best performers include CIMIC Group, Oz Minerals and Challenger, which are all up around 7% while Orora, Qantas, South 32 and Cochlear are all up around 5%. The worst performers include Unibail-Rodamco-Westfield down more than 6%, Bendigo & Adelaide Bank down more than 5% while Crown Resorts and Cleanaway Waste are down more than 4% so far.

What's next for the Australian share market

Last week I mentioned that October has a history of being volatile with wild swings up and down, and this week we have experienced both. On Monday, the market rose more than 1% before closing slightly lower, while on Thursday the market was down more than 1.5% before turning to rise. Rather than continuing to rise this week, the All Ordinaries Index has really gone nowhere, so it will be interesting to see where it closes today.

With the US Presidential election now in its final stages, the American market is showing weakness with no real signs of direction, which I believe is weighing down our market. Once the uncertainty of the election has passed, I believe the Australian market will move up nicely into Christmas and beyond.

However, we still need to be cautious as we may experience some short-term downside before the market continues to trade up. For now, it is wise to sit and watch the show for a few more weeks but to get ready for the opportunities that will unfold in the not too distant future.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.
Kerri Moore
October 24, 2020 8.25am

You are wrong. The aged pension was set up to provide an income when you retire. There wasn't any superannuation when I left school and started working. We paid an extra tax. to fund it

Get your facts straight. Ask any 70 year old

Estelle L
October 25, 2020 10.14am

It was set up to provide an income for people who didn't have either the foresight or the means to save and invest for their own retirement. Compulsory superannuation came in 1992 but of course there were self-funded retirees before that.

If you are 70 now, you would have been 42 when compulsory super was introduced.

Kerri Moore
October 25, 2020 1.41pm

Yes paying a home off and raising children. At 42. Retirement was probably the last thing on my mind

We knew there was a government pension. for when we retired Nobody said oh. This is only a supplement

Start saving

Patrick Jones
October 25, 2020 1.51pm

The pension was not designed as a safety net as you described...Where did you get that from? It was always meant to be an income which falls into line with aged benefits and meant to be a return to the aged tax payer contributor just as it is explained in every country in the world...Its not comparable to an employment benefit or other non working benefits.

John McCallum
February 25, 2021 4.06pm

I will soon be eligible (age basis) for the old age pension but my current asset base will prevent me from getting any money. I will have to use my assets to pay the bills etc. That is fine by me but it really irks me to think that I cannot at least get a Health Care card or in WA, at least be eligible for a state government Regional fuel card (I think it is about $600 pa and can be used to buy fuel for your car) these are small things but I think should not be based on wether one is eligible for a Pension or not .....we all paid taxes and in fact I paid a lot more than most who are currently receiving all the Pension benefits.