Why are the retirement sums increasing yearly?
The increase in retirement sums is due to the following:
- Increase in cost of living
As prices of goods and services rise over time, we will need to save more for retirement to ensure that our savings will still be sufficient to cover higher expenses in the future.
- Increase in life expectancy
As people are living longer, we will need more savings to last throughout our retirement.
- Increase in standard of living
As incomes increase over time, our basic retirement expectations and expenses will also naturally increase. Setting aside more savings allows us to receive higher monthly payouts to afford higher retirement expenses in future.
However, if you are already 55, the yearly increase won't affect you. The retirement sum you need to set aside depends on when you turn 55 and is fixed for the rest of your life.
It's important to keep in mind that the amount needed for retirement has increased over the years. For example, if the Full Retirement Sum had remained unchanged from $30,000 when it was first introduced in 1987 (previously known as the Minimum Sum), it would only provide a monthly payout of about $300 today. This amount would not be enough to cover daily living expenses and rent.
Overall, the goal of increasing retirement savings is to help individuals build a financial foundation that will enable them to support themselves through retirement.