Baby boomers near 65 with retirements in jeopardy

[The Kernel]

IIRC the 10% figure was quoted for an Australian audience. I generally save more than that, but the 10% may be reasonable given some differences. For example

1. Our health system will cover you for medical bills. Those expensive chemotherapy drugs, taken care of. That lipitor, plavix and ikorel you need for your heart, government subsidised (which is why I get irked when people complain that they can't afford the drugs so they don't take them. Its dirt cheap because of government subsidies).

Well technically we have Medicare, although I'm sure it's not as inclusive as the Australian system. Most people I know get supplemental plans.

2. The average Australian most probably isn't earning close to what you are earning. The average American isn't either if I look at GDP by PPP / capital, thus they might not need so much.

True, I live in a very expensive part of the country and I'm sure I could do better by picking up and moving to a state with lower income and property taxes and with cheaper real estate. But I don't want to be forced into that decision.

3. We do have a good social safety net. Maybe too much, but as a rule a social safety net tends to promote spending rather than saving.

The US social safety net (Social Security namely) seems chiefly designed to keep old people off of the streets if they end up making poor decisions with regards to their finances. It works fine for this purpose but it doesn't do a whole lot more than that.

4. I believe the 10% of savings isn't counting Superannuation (which I assume is our equivalent to your 401k).

I don't think so, my Googling indicates that the Australian Superannuation is more akin to the US Social Security system with its compulsory participation. The 401k is a government subsidized, tax deferred investment system designed to supplement Social Security as it (along with Medicare) really only provide the minimum to keep you in a home and with decent medical care assistance.

It's good for what it is designed to do but for anyone that wants to maintain a certain standard of living it must be seen as purely one part of an overall retirement plan.

Hmm. There is clearly a difference in the situations between countries, and what I said may not necessarily be applicable to the Americans perusing this thread (although I stil stand by recommending reading "The millionaire next door", because the financial principles are universal). For example our financial experts don't recommend us increasing our Super (401k equivalent) unless

a) You are damn rich, like celebrity rich. The reason being you can't touch it for ages and the rules may change by the time you retire. The reason its good for rich people to do it, is because of tax reasons, and they don't need that much money right now.

b) You are poor - because for a while the government will provide extra contributions.

As said earlier, we most probably don't need as much because most of our medical costs are taken care of.

I guess the question is what you are comfortable with. If you are okay with just subsistence then I'm sure it is fine but I plan to use my retirement years to travel and I want to live in the style that I'm accustomed to without having to sweat every major purchase like I see so many seniors doing. That means putting away a good sized chunk of change for the future.

I am going to have to look up the calculator for things retirement income, to work out how much I need. As a general rule, I don't utilise the maxing out of our 401k equivalent. My Superannuation currently stands at a bit less than $59 K AUD after having worked full time since 2004 (oh, we apparently have more than parity with the Greenback). I however prefer the extra money to either a) pay off my homeloan and b) invest it myself rather than get an "expert" to do it. Give me a year and see if I can beat the experts on the stockmarket.

The reason we use the 401k as a supplement to our Social Security is because of a few reasons:

1) Social Security is fixed, you really can't contribute more or less than the mandatory levels. It sounds like your system has more flexibility, but you don't have any control over risk.

2) 401k investments are tax deferred which gives them a distinct advantage over private savings. Sure you can also invest in other types of tax advantaged accounts (such as a post-tax, tax-free growth ROTH-IRA) but those contributions are much more limited ($5,000 annual IIRC).

3) 401k's are completely controlled by the investor. That means I can keep it in 100% equities while I'm young and slowly shift the percentages towards bonds and more liquid investments as I get older.

[Xon]

Australian Superannuation's are a mandatory investment fund which your employeer pays into as a percentage ontop of your wage. These contibutions(both employer and voluntary employee) to it are all pre-tax too, and when you are eligible to withdraw from your superannuation it's taxed just like another income source. If you have so many assets(excluding your home) and/or are earning over some threshold(it changes periodically), you don't get an Australian pension which is the equivalent of Social Security.

As for the risk, it depending on exactly which superannuation fund you are using. As you can shift what it get's invested in. Relatively recently, the exact superannuation fund is no longer determined by the employer but you want to have your superannuation fund with a large member base as possible to ensure the returns are competitive. You can also "rollover" from one superfund to another either very cheaply or for free. I think it is a legal requirement that there are no exit charges for switching funds, but I'm not 100% sure on it.

[PainRack]

Also in regard to what constitutes a reasonable retirement, I am not sure if your retirement income needs to match current income. The reason being with current income you are saving, once you retire you aren't. So you should only try to match spending.

In any event, I am hoping to do what the controversial American financial "guru" Robert Kiyosaki advocates. Have enough assets such that the assets generate a sufficient income for you to live on. Currently since I am young I am focussing on growth assets, when I get older I will no doubt switch to income producing ones.

The real problem is once you retire, your expenses may go up significantly. Healthcare bills are resolved in Australia, but stuff like hiring a maid to take care of you, finanicial costs like rennovating your home/shifting apartment to a place where its wheelchair friendly etc are significant costs still. Ditto to places like us where health costs are paid for by the citizens.