The ability of developed nations around the world to provide a suitable taxpayer-funded pension is constantly being tested due to increasing life expectancies, rising energy costs, escalating health costs, and in many cases, shrinking populations.
Although Australia has a growing population, the demographics still point towards a greying nation, with a smaller amount of workers over time supporting an increasing number of pensioners.
We now have two generations receiving the pension, as Aussies enter their late eighties and nineties, and their children enter their sixties and sometimes seventies.
How Many Years Do I need To Plan For?
In the 1960s, the average period for receiving a pension was six years, reflecting lower life expectancies. In the future, the average period for claiming a pension is expected to be between 30 and 40 years. This will create a huge financial pressure on our country’s finances.
The current average life expectancy for Australians at age 65 is just over 22 years for a female, and just over 19 years for a male. The longer you live the better your average life expectancy becomes.
For example, if you reach the average life expectancy that you had at 65, that is, you reach the age of 87 for a female, and 84 years for a male, then you can expect to live another 6 or so years.
The average life expectancy for an Australian female aged 87 is 6.11 years (reaching the age of 93), and for a male aged 84 years, roughly 6.5 years (reaching the age of 90.5).
If you retire before the age of 65, as many Australians do, then you can expect a potential retirement of more than 30 years.
What Does This Mean For You?
The earlier you start preparing for retirement, the more options and choices you will have which will in turn give you a better quality of life.
Your pension age (the age at which you are eligible to apply for the pension) depends on your date of birth.
If you were born before July 1952, your pension age is 65 years (and younger for women born before 1949).
If you were born on or after 1 July 1952, then your pension age will be 65.5 years, 66 years, 66.5 years or 67 years, depending on your specific date of birth.
The first shift upwards in the pension age took place in July 2017 when the pension eligibility age increased to 65.5 years, and then in six-month increments every 2 years, until it reaches the age of 67 years from 1 July 2023.
TIP: Discover when you can get your super or apply for the age pension Here.
How Are You Currently Tracking
This calculator helps you work out what income you are likely to have from super and the pension when you retire. Click Here.
What Studies Show About Retirement
A study commissioned by News Corp Australia and conducted in partnership with Industry SuperFunds found that 70% of Aussie workers expect to use the pension when they retire.
More alarmingly, over 60% of workers predict that they will continue working into their retirement years.
With regards to the pension:
- Around 1 in 3 Australians expects to draw the full pension when they retire.
- More than 1 in 3 (37%) expect to qualify for a part pension only.
- About 1 in 4 (24%) don’t expect to draw a pension at all, instead relying on their superannuation and savings.
How Much Money Is Enough?
Your answer to this questions depends on 4 main factors:
- Life Expectancy. How many years will you have in retirement?
- Income Expectations. What amount of income you would like to live on each year?
- Investment Returns. What you expect to receive on your superannuation account and from any assets you have created.
- Work Plans. Do you intend on continuing to work?
The ASFA Retirement Standard indicates that you need $60,457 per year in income for a comfortable retirement as a couple, or $44,011 as a single person.
Alternatively, as a couple you can create a modest lifestyle on an income of $35,189 a year, mainly courtesy of the government-funded pension. As a single person, you can source an income of $24,506 a year with minimal savings and a government-funded full pension.
What If I Want More?
Behaving in the same way as previous generations just isn’t going to give us the results we want. The definition of insanity is doing the same thing over and over and expecting a different result.
You CAN change the outlook of your financial future by taking a few simple steps – being conscious with your money and how you spend it, investing in assets that will grow your wealth for you and insuring yourself in case of any mishaps along the way.
We have many clients who have been working with us over the years building a portfolio of investment properties, steadily growing their money.
They understand that to create the future they desire, rather than putting their hard earned cash in to things that will depreciate (cars, flat screen TVs etc.) or spending it frivolously there is a better way.
More often than not, you can invest in property for as little as $30 dollars per week (or $4.28 per day). This is less than a gym membership or the equivalent to a latte addiction.
Let me ask you what is going to give you a better result for your financial future?
Get Started Today
Discover how you too can create something better and set yourself up for a comfortable retirement where YOU make the decision on what your retirement will look like. Not the Government. CALL US today on 08 6323 2306 and let’s get started on your plan.
