Well, it’s finally happening as of 1 July 2023 – the age pension age will now be 67, and will eventually increase to age 70 by around 2050. Considering over 80% of retirees are in some way reliant on the age pension, this line in the sand should be a real wake-up call to our younger generation.
You would think after a lifetime of working, gaining a supplementary income from the Government after all those years of paying taxes should be a given, but alas, it is not. Having recently viewed the streets of Paris filled with citizens virtually moving as a mob to burn down the city all because the President increased the age for a pension in France to 64, one would expect a little bit of social upheaval in Australia. However, that’s not how we roll. A couple of simple sobering statistics cement the reality that gaining age pension support in the future may be a thing of the past.
Firstly, we are now living 3 times longer in retirement than my grandparents did. At that time the average retirement age was around 65 and life expectancy for a male was 72. Today the average retirement age is 60 and life expectancy is around 87. That is 3 times longer living in retirement in 2 generations and those numbers will only increase in the future. Secondly, the baby boomers who make up the largest segment of our population are now moving into retirement. I have seen statistics that indicate this migration could reduce the tax-paying public by up to 50%. You don’t have to be Einstein to work out that the Government could not sustain the current percentage of retirees receiving income support.
The Government’s solution to this looming crisis in 1991 was the introduction of the Superannuation Guarantee system. Unfortunately for many, the message of self-funding our retirement was too little too late, particularly for women who tended to spend less time in the workforce and on average live longer than their male counterparts. Thank goodness there is still age pension support to help those who need it, however with the rising cost of living, one must wonder how they survive without additional family support.
Our younger generation will need to work towards a self-funded retirement and the sooner you start the more likelihood of success. This coming Financial Year (2023/24) sees the Superannuation Guarantee Contribution (SGC) increase to 11%, in line with the legislated increases peaking at 12% in 2025/26. In addition, there are several ways you can aid in your superannuation’s health.
- Look at your Asset Allocation – a lot of industry & retail fund accounts are set to a default MySuper allocation. By finding out what you are actually invested in, you can determine if the risk/return is suitable for you and your long-term needs.
- Fees & associated costs.
- Make additional contributions – always check contribution caps before contributing.
Be mindful that there are rules and caps around contributions, and you should speak to one of our financial advisers before making additional contributions or adjustments to your account.
Stephen Lowry (CFP® Professional, DFP, AIF®) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Any information provided to you was purely factual in nature. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.