Perhaps nothing is more frustrating than the feeling that your retirement goal post keeps on being moved. I am often asked the question by retirees both pre-and-post as to why the rules seem to keep changing. Politics aside, the only answer that I can come up with is that the rules keep changing as our population keeps changing.
To explain this in a bit more detail:
- There is an ageing population and in 2020 there will be more 65 year olds than 1 year olds.
- ABS data showed in 2012 that the average Life Expectancy for a Male is 79.9 years and for a Female is 84.3 years. By 2055 this is expected to be 95.1 for males and 96.6 for women.
So the amount you thought would be enough to see you through your life after retirement now has to last longer and the question is then “how do you fund this” (and have the lifestyle you planned for)? Just as importantly, how does the Government continue to fund the Age Pension?
The Governments answer to this funding problem seems to be to keep changing the rules, and not only changing but tightening. This is evident by the recent changes to the ‘Asset Test’ that commenced on the 1st January, 2017 along with the changes in the assessment of the Family Home for Aged Care.
So where did it all go wrong?
As a Baby Boomer, you haven’t always had the benefit of compulsory superannuation (or the superannuation guarantee). Would this have been enough? Probably not.
And whilst those with a mortgage are no doubt loving the current ‘low-interest’ rates (remember when you had to pay your mortgage off at 18%????), how do you achieve a decent return on your savings?
Another problem is that we all wanted to be a part of the ‘Australian Dream’ to own our own home so there was a lot of emphasise placed on paying this off first. Whilst this has provided you with a major Asset, it would have left a ‘gaping hole’ in your retirement savings.
This ‘Asset’ is not going to provide you with an income in retirement, unless of course you want to rent out some of your spare rooms.
Most people think that once they are now debt free they can use all of that spare cash that is burning a hole in their pocket to put into super. Unfortunately now the superannuation limits are being reduced even further on the 1st July, 2017.
So what hope is there and will you have to work forever? Whilst there is no ‘magic’ formula I do believe that with knowledge comes power. So make sure you seek some sound advice, have an understanding of your goals for your retirement and a plan in place. Because remember ‘A Goal without A Plan is Just A Wish!’.
And by the way, make sure that once you have your plan, your plan is reviewed – especially when the goal posts get moved.
But even more important is that prior to having a plan, make sure that you have the knowledge. I regularly run ‘free’ retirement planning and aged care sessions at various venues. If you would like to come along to one of these sessions, send me an email and I can provide you with the details.