The Federal Government spends just 4.2 per cent of its GDP on age pensions – nearly half the OECD average of eight per cent – the latest OECD survey on health and welfare spending shows.
Compare this to income support for people of working age which is 4.3 per cent – above the OECD average of four per cent.
But most of us can afford to foot the bill for our retirement, according to research released last November by the Grattan Institute.
Their report found most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income – well above the 70 per cent benchmark recommended by the OECD –and more than enough to maintain their pre-retirement standards.
The researchers argue even those on lower incomes will get a financial boost when they retire because of the combination of the Age Pension and their compulsory superannuation savings will be higher than what they were earning.
Retirees better off – as long as they own their home
While some current retirees are in financial stress – especially if they rent – the majority are less likely to be struggling financially than people of working age.
However, this is likely to change with rates of home ownership predicted to drop from 76 per cent today to 57 per cent by 2056.
Without the ‘safety net’ of the family home, those on lower incomes – particularly in metropolitan regions such as Sydney and Melbourne – will be relying on more help from the Government to meet the cost of rent.
The takeaway? If you can afford it, owning your own home is still the best way to ensure a comfortable retirement – even if you choose to downsize to a smaller home or apartment or move into a retirement village or land lease community later on.