While we are on the topic of retirement, it is worth considering these interesting and sometimes surprising facts about retirement.
The pension age is set to rise.
By 2035, you’ll need to be 70 before you can qualify for the Age Pension.[1]
What does Australia’s ageing population mean for your retirement?
In the next 20 years, potentially over 100,000 more people will retire each year – in the last financial year alone the number of people over 65 years of age has increased by over 100,000.[2] Further the Intergenerational Report released by the Federal Government in 2015, estimates that the number of Australians over 65 will double by 2055.[3]
We are already facing Government spending reductions on health, aged care and the pension as announced in the 2015 budget and reduction for funding for Aged Care Providers announced in the 2016 budget, and with a continuing trend projected for an ageing population, there may be fewer Government resources available to allocate in the future
Your retirement could last 20 years or more.
It’s not just planning your retirement lifestyle that is important, it’s also about considering the longevity of your retirement savings with increasing life expectancies for Australians, with men exceeding 80 years of age and women exceeding 85 years of age.[4]
We will increasingly have less people available to support the growing needs of our ageing population. The non-working-age population is growing faster, at 2.2%, than the working-age population, which is growing at 1.3%.[5]
Will you have enough super?
The current average superannuation balance at the time of retirement in Australia is $292,500 for men and $138,150 for women (2013/14).[6]
The ASFA Retirement Standard recommends that $545,000 in superannuation is required for a single person to live a comfortable lifestyle[7] in retirement.
Are your retirement plans protected?
Have you considered what would happen to your retirement plans if you suddenly needed to take over the full time care for your grandchildren because their parent, your adult child, suffered a traumatic illness, became disabled or passed away? Importantly, could you afford the $812,000 that AMP and Natsem[8] reported is necessary to raise two children, on your retirement income?
95% of families do not have adequate levels of insurance,[9] and a recent report[10] indicates that most Australians don’t know the extent of the cover within their policies or if it is appropriate for their circumstances.
An unexpected illness or sudden death of an adult child is not just emotionally devastating, but it could also have enormous impacts on your financial wellbeing and that of your grandchildren.
What you need to do to build plan your retirement.
If you want to grow your superannuation and make the most of your retirement planning, the most important thing you can do is seek professional financial advice. Your financial adviser can help you understand your complete financial situation and appetite for risk, as different superannuation investment strategies may be more appropriate at different stages of your life and for your investment style.
If you would like to discuss your retirement, I encourage you to give me a call.
Phillip Dibben is a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information (including taxation) does not consider your personal circumstances and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.
This publication cannot be reproduced in any form without the express written consent of the author.
[1] http://www.dss.gov.au/about-the-department/publications-articles/corporate-publications/budget-and-additional-estimates-statements/2014-15-budget/budget-fact-sheet-seniors-and-age-pension
[2] ABS 3101.0 Australian Demographics Statistics June 2014
[3] http://apo.org.au/files/Resource?2015_igr.ashx_.pdf – Executive Summary
[4] http://mccrindle.com.au/the-mccrindle-blog/24-facts-about-australia-at-24-million
[5] http://www.abs.gov.au/ausstats/abs@.nsf/0/1CD2B1952AFC5E7ACA257298000F2E76?OpenDocument
[6] https://www.superannuation.asn.au/media-release-8-december-2015
[7] https://www.superannuation.asn.au/media-release-8-december-2015
[8] AMP/Natsem (National Centre for Economic Modelling) May 2013
[9] Lifewise/NATSEM Underinsurance Report – Understand the social and economic cost of underinsurance Feb 2010
[10] Zurich Insurance, Research Whitepaper, February 2014