Some people may leave it until retirement is almost upon them, while at the other end of the spectrum some will take the bull by the horns much earlier – perhaps even decades before that momentous day when they clock off for the last time.
- Will you retire or re-fire?
- Why are we happier at 50 than 40?
- Do men and women want different things post-retirement?
The majority of us will be somewhere in between these two extremes, but the need to start taking our super and retirement a lot more seriously and a lot earlier is becoming increasingly vital due to two very big issues:
1. Australians are living longer on average than ever before
2. The ratio of working people to retired people is nosediving
So, what does this mean?
First the good news!
On the plus side, it seems that once you get to age 65 chances are you still have quite a lot of lifetime stretching out ahead of you. The latest statistics tell us that men will on average live another 19.2 years after reaching the current age pension qualifying age of 65, which means they will survive to the age of 84.2. For women the story is even better, with an expected average of 22.1 years of life remaining, taking them up to 87.1 years*.
Bear in mind that these figures are averages and many of us will go on to live longer. In fact, the number of centenarians increased by a whopping 263% over the two decades to 2014.^ (Sorry to tell you fellas, but most of them are women!)
We are living longer, but . . . .
On the downside, there is increasing pressure on the age pension. You have probably heard media reports about how the social security safety net for older Australians is unsustainable in its current form. Moves are already underway to increase pension eligibility ages and means testing is already beginning to tighten via the assets test.
This trend is based on the dramatic changes in population ratios over the last hundred years or so. Back in 1901 there were around 15 people of working age (age 15 to 64) for every 1 person aged 65 and over. Jump forward to 2011 and this ratio had plummeted to around 5 of working age for every person 65 and over+. The Australian Bureau of Statistics projects this trend to continue and by 2033 the ratio will be just over 3 to 1 and by 2063 around 2.5 to 1#.
To summarise the gist of government policy into one phrase; “something’s gotta give”.
It’s not just the quantity of life that’s changing
Longevity’s one thing, but our quality of life is also improving. Medical advancements together with health and fitness awareness are increasing our ability to enjoy and participate in an active life to much older ages. That means more people will need greater financial resources to make the most of their retirement.
What this means for you right now
So, what does this all mean if you are currently in the latter half of your working life? Maybe you are at the stage of kids growing up and leaving home? Perhaps the mortgage is mostly behind you and you finally have the time to entertain fantasies about the day when you put your feet up? You probably have some sense that planning financially for retirement needs attention, but it may all seem a bit overwhelming.
The first thing to realise is that you are not alone in this. In fact the majority of people are largely disinterested in superannuation and retirement planning. There is no question, however, that those who do plan sooner and plan better will gain a great sense of relief and certainty about the future. So, let’s look at how you can go about it.
Want to make the most of your retirement years? Start planning early!
Define the dream to inspire the plan
When we break it down, planning to retire comfortably is in some ways no different to planning any financial goal. Remember that motivation for saving for your first car, overseas trip, or deposit on your first home? These goals had a very tangible appeal and were easy to visualise.
When it comes to your retirement you need make the goal as solid as possible in order to develop the motivation and strategy for achieving it.
The first step is to spend time visualising what you want to do in retirement. This could include fun ideas such as:
- Buying a beach holiday home
- Cruising the Rhine or the Alaskan Fjords
- Getting that motorhome to tour Australia
- Lazing on your own motor cruiser
You also need to consider how you want to live day to day. What sort of ongoing monthly income do you want to have so that you can follow your sports and hobbies, dine out or go shopping without any financial worries?
Remember, the sky’s the limit when it comes to your dreams and wishes. Why not make retirement the time of your life?
Do the sums and start making plans
Once you have drawn the picture of your ideal retirement lifestyle, then you can start to work out how much money you will need in your super to make it reality. Get some numbers down on paper for all the things you dream of.
From there it is a matter of breaking the dollar goals down to a plan for accumulating, investing and growing your way to success. This includes analysing where you are at now with your super and what you need to change to make sure you reach the end result you desire.
It’s your retirement, so why not own it?
Think of retirement like the biggest, longest and grandest of all holidays. Spice it up with all the things you have dreamed of doing and then take the step of actually getting the numbers on paper to make it happen. It’s time to take control of your retirement – the sooner you do, the more amazing it will be.
* Australian Bureau of Statistics: Gender Indicators, Australia, Feb 2015.
^ Australian Bureau of Statistics: Australian Demographic Statistics, Jun 2014.
+ Australian Bureau of Statistics: Australian Historical Population Statistics, 2014
# Australian Bureau of Statistics: Australian Social Trends, 2014
Tell us what you are dreaming of in retirement? Share your ideas below.