The other day I read an article about superannuation and it had an interesting angle…
The research has found there is confusion between lifestyle expectations and standard of living, with 75 per cent of those surveyed saying a comfortable lifestyle meant “having enough money to do what I want, when I want”.
Standard of living is:
While lifestyle is termed as:
So standard of living would be having a decent job, enough food, a house and decent clothes, and lifestyle would be having a large two story house, a well paying job, gourmet food and expensive clothes.
In Australia we have compulsory superannuation, which means that our employers put aside a portion of our wages (between 9-15%) that is untouchable until we retire (depending on how old you are, it could be accessible from 55 to 60).
Currently baby boomers are retiring and depending on their industry, might have a lot or not much superannuation. Those who have a bit less can access the aged pension from the government.
Being in my mid-forties, I’m fairly interested in the whole super thing and the line between living now and paying off the mortgage, versus putting as much in superannuation as I can.
I personally contribute extra, which is the recommended thing to do. But I also have a mortgage that I need to pay down as well.
The interesting thing about this article is the lifestyle versus living standard confusion that seems to be happening with Australians.
We underestimate how prosperous we are, while overestimating how much we actually need. Coincidentally, a Daddo was on TV talking about this the other week, and I discovered it’s actually a UBank production. It’s worth a watch and talks about what we need versus what we think we need to be happy. Not surprisingly, it concludes that we can do OK on less stuff and smaller houses and actually be happier.
One of the questions might really be, why do we think we need more stuff to be happier? However, it seems to be a very human condition and one that is variously promoted by anyone selling anything.
So how does this work into the superannuation debate?
Well according to that MLC research, people who are currently are living pay to pay are then suddenly reckoning they will need $150,000 in retirement to be comfortable! Ummmm, if you don’t feel comfortable now, how exactly is that going to work?
Meanwhile, there was an article about living standards in retirement that offered a different view, saying that we didn’t need all that much to live really, and the figures for a comfortable lifestyle were way out of line compared to a standard or ‘adequate’ lifestyle.
Of course all of this is rather debatable depending on where you are on the lifestyle track currently.
And a big player in being OK in either situation is if your accommodation costs are included or not. Hence the ongoing debate about mortgage versus super payments.
My parents worked very hard, largely as a single income family, to pay off the family home before retirement. My Dad got some good advice and they have what I consider (and they do too) to be a comfortable lifestyle and a good standard of living. They don’t travel all the time and they shop prudently, but they generally have what they want and enjoy life. They never were people who went out dining every second night or bought ‘luxury’ items.
I think I would be just fine on whatever they are on (a super/pension mix) if I too owned my own house. Whatever house that might be. And while previously my plans might have been grander, I’m looking for a bit more balance going into the future. I was a little too stressed and focused on how we would live in retirement and forgot that we needed to live now. Not to mention that we were probably (very probably) overstretched where we were with our incomes as they were.
Currently I don’t feel a lot of financial stress, which is a nice change. I’m not blaming anyone for that, it was largely self imposed, with a bit of values clash in there thrown in.
At the moment, my life is a fifty fifty financial arrangement and that is working for me (and hopefully for the lovely). I still find myself asking the lovely not to buy me things or take me places because of our slightly different income levels. That’s just because I’m not comfortable with someone going into debt for me. It’s still very ingrained from my childhood about debt and spending.
However, I’m more relaxed about spending my own money on things that might be less about prudence and more about fun. I’ve not really been about too much stuff in my life, although I have all the things I want and need. I’m more about experiences and now I’m happier to spend money on those (and hopefully share them with the lovely or others). Not at the expense of the bills, but after saving.
But back to lifestyle versus living standards in retirement…
As long as we have some decent accommodation – with garden – then I think I will be pretty happy. The house the lovely and I have now is very good – not too many steps and fingers crossed, we can pay it off before we retire. The trick is to be happy with it long term and get it how we want. Or alternatively, get something that we can afford down the track that covers our physical, as well as mental and emotional needs. We will have to think carefully with any future moves on how they might affect the retirement funds. However, I think we could both quite happily live here and garden without too much else to amuse us (OK, maybe some TV streaming services!).
I want a good standard of living, which is what I have now with a job. Without a job in retirement, I want a good standard of living too. But I’m happier now to split the experiences so that I enjoy the more expensive ones now and plan for a quieter life later -as long as the odd treat happens and you don’t necessarily need money for that ;).
Wishing you all the happiness the Universe can bring