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Four reasons many Australians will work until they're dead

The 2008 recession and the 2020 pandemic are hastening the end of retirement as we now understand it. The problems of chronic underfunding, low returns, longer lives and increasing aged care and medical costs are accelerating. The pressure has been exacerbated by individuals forced to draw on funds during the pandemic.

Average balances in super are insufficient

Australia’s post-work savings system, a model for the world, illustrates the unsustainability of the arrangements. Despite its small population of about 26 million, Australia has over $3 trillion in private retirement savings. Mandatory contributions (currently 10% of pre-tax income) and generous tax benefits underpin this savings pool, which is one of the largest in the world.

However, the typical accumulated balance at retirement age is about $200,000 for men and about half that for women. ASFA data shows the average super balance for men aged 55 to 64 is $332,700 and women is $245,000 but the medians are a more accurate measure and they are only $183,000 and $118,600 respectively. The averages are artificially increased by a small pool of people with large balances but even the average balances are well below the $600,000 to $700,000 estimated to be necessary for homeowning and debt-free couples to finance their retirements, which may last 20 years or more.

The shortfall forces increased reliance on a government-financed pension, originally intended only as a safety net. About 70% of retirees are reliant in part or full on the state pension, which, at about 40% of average weekly earnings, is substantially lower than the 65-75% thought to be needed in retirement. With public finances stretched, access to the government pension is likely to become more restrictive over time.

Last year’s Callaghan Retirement Income Review of the Australian system highlights how retirement arrangements will be forced to evolve.

The centrepiece is the proposition that retirees must live off their savings and the equity in their home, not only the earnings on their investments. Savings should not be seen as building a legacy or nest egg to be bequeathed to the next generation.

All savings must be exhausted and the family home monetised to fund living standards in retirement. In essence, your account balance should be at zero at the time of your and your spouse’s death.

Given the need for shelter, this will necessitate taking out reverse mortgages (effectively borrowing against the value of the home with the debt to be liquidated on sale at death).

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Policy prescriptions pose difficulties

First, households must borrow when there is no capacity to service debt. The loan and capitalised interest must be recovered from the eventual sale proceeds of the home. This is dependent on asset values. If population cohorts retire and die around the same time, it will place pressure on house prices which secure mortgage loans.

Second, reverse mortgages may not generate sufficient money to finance retirement. It assumes high levels of savings or home equity. This is compounded by the likely low loan-to-value ratio of a reverse mortgage because of the lack of cash interest payments and collateral value uncertainty.

There are difficulties in estimating borrower longevity and partner survival, something which has eluded mankind and actuaries alike. Commercial lenders may be reluctant to participate without government support or guarantees, which would increase the demands on state resources.

Third, the scheme favours existing homeowners. Housing unaffordability means that many in future generations will never own homes. They are simultaneously deprived of bequests from parental estates reducing their seed capital. Given the record numbers of children forced to move back in with parents, the liquidation of the family home may also deprive them of housing.

Fourth, the strategy entails running down the wealth stock of a country as savings are used up and houses sold. In effect, capital is consumed to finance current expenditures. In aggregate, the running down of savings will affect available investment resources across the economy, making the nation more dependent on foreign sources. Uncertainty of drawdowns may affect long-term investment decisions.

The problems highlight failures in economic and social policy. Low wage growth and lack of income security combined with consumerism has meant inadequate savings. Absurd economic policies driving down interest rates over decades have reduced investment income and cash flow. They have exaggerated housing prices, which are now apparently to be used to cover insufficient savings and inadequate investment cash flow earnings.

Paralleling the 2000 Saturday Night Live 'More Cowbell' comedy sketch, policymakers now see more debt as a panacea to every problem.

Retirement will revert to a privilege of the wealthy, supported by expensive, regressive tax subsidies which always favoured high-income earners. For the shrinking middle class, savings and state pension, as long as it is around, may prove insufficient. Most will ultimately be unable to retire, having to work, and work, and work till they die.

When the penny drops, this additional inequality will manifest as further resentment against the elites and the swamp with unpredictable political consequences.


Satyajit Das is a former senior executive and banker. His latest book is A Banquet of Consequences – Reloaded  (Penguin March 2021) updates the 2015 edition with 150 new pages covering MMT, PPT (plunge protection team otherwise known as central bankers), the Trump/Johnson ascendancy, the climate emergency, accelerating resource scarcity and Covid-19.

This article was first published in The Australian Financial Review and is republished with permission of Satyajit Das.


Jon Kalkman
August 09, 2021

Since the Retirement Income Review (RIR), the language has changed because the focus now is very much on spending capital in retirement, not just income.

Up until the RIR, the family home was a sacred cow, exempt from capital gains tax and also exempt from the age pension assets test. Previously, the underlying sentiment was: “This is mine, I worked for it, and when I die it goes to my kids. I paid taxes all my life so I am also entitled to the age pension”. Any politician who tampered with that “entitlement” risked political suicide.

The RIR has put the family home into the retirement mix. It says quite clearly that at 12%, compulsory super is more than adequate and if you need to rely on the age pension, that too is adequate. But if you need more than either or both of those two sources of income, you have wealth locked up in your family home that you can tap at your discretion and we just happen to have an excellent government home equity scheme available so that you do not have to relocate. For some people it represents a huge store of capital available to help fund their retirement needs as required.

The RIR has included the family home in the retirement funding mix without any reference to the assets test, without any compulsion, and without any political backlash.

August 07, 2021

Well said Satyajit.

Andrew Smith
August 05, 2021

Interesting read but three points 1. When will superannuation hit it's point of maturity i.e. when any given person has had their super and SCGs from the start of their working life (e.g. '90s?) vs. those retiring now in the transition period? 2. Much depends upon management of assets e.g. a home and whether to crystalise value and downsize? Prices do not and are not guaranteed to go up. 3. Related to house values in real terms (vs. nominal headline prices) and demography we have a baby boomer 'bubble' which will have significant impact as it passes through retirement phases.

Conversely, look at nations with purely state pension system and demographic issues i.e. ageing populations, below replacement fertility and no immigration, neither permanent nor temporary churn over (like our NOM), hence, increasing pressure on budgets, services and future pension payments; both a potential budgetary and population death spirals.

August 05, 2021

Interesting article. I posit that a person is more than their superannuation balance, or their financial situation, and consider the health benefits of NOT retiring. I cite a 2010 study in The BMJ, a 2015 study that appeared in Preventing Chronic Disease, and a 2016 study in the Journal for Epidemiology and Community Health that all find that continuing to work beyond retirement age actually lengthens life expectancy. There are caveats though, but the message is clear; that provided you enjoy your work and your work is not physically demanding, why not continue working for as long as you can. Of course, that option is not available to everyone.

August 05, 2021

Agree with James' comments. 1. Unless all borrowers died within a period of a few months, I highly doubt there would be any impact on home prices. Look at the increased prices since the beginning of he pandemic when foreign borrowers have all but disappeared & banks etc were forecasting significant falls. 2. Insurance companies etc have little difficulty in assessing longevity & have done so for decades. As for asset values, refer #1 above. 3. Der. No house = no reverse mortgage, 4.This argument ignores the value of new monies flowing into the superannuation system & the fact that for each house seller there must bee a house buyer.

August 05, 2021

Up until recently the superannuation system has been immature. A quick back of the envelope calculation for a worker earning a modest $60,000 p.a., 10% superannuation contribution less 15% is $5,100 p.a. net input and even earning a modest 5% p.a., starting balance at zero, and even say only 37 years of working, with no pay or superannuation increases, the compounded return yields some $518,000! Average balances $200,000 for men?! I don’t think so! Catastrophising somewhat methinks!

August 05, 2021

James, in 37 years time $518K won't be worth too much I fear.....and the average house price in this ridiculously managed country will probably be about 3 million.

August 05, 2021

I sincerely doubt that house prices will continue to grow at a rate far exceeding median wage growth. We are in a momentum and low interest rate driven bubble. Borrowers have to get loans, dependent in part on their capacity to pay the loan. Also, interest rates are super abnormally low and cannot stay this way forever. When rates go up.......asset prices go down!

Graham Hand
August 05, 2021

James, this is an invalid comparison. Your $518,000 are in future dollars so of course the number looks high compounded over 37 years. Das's numbers are present day dollars, as confirmed by ASFA. He is not saying men will only have $200,000 in future dollars in 37 years.

August 05, 2021

My point is that even with a low wage, no pay rises , contributions % not increasing and a below average return over a working lifetime future retirees will be better off than some are now! Of course wages should grow at least with CPI and contributions (in tomorrow’s dollars) will be added every year. I really do think he’s overly pessimistic!

August 05, 2021

Just found a better online calculator, that includes inflation.
ASFA comfortable retirement income for a single about $44,000 p.a. (their figures, not my ideal!). So my example 30 yo, with no present superannuation balance (unlikely), who retires at 67, wanting $44,000 p.a. in todays dollars (with $0 pension payments), savings running out at age 95, average invest return 7%, and inflation 2.5% would need to have saved a little over $701,000 in todays dollars by age 67. I reckon that's very doable!


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