Rising Tide Blog

Skyrocketing life expectancy and medical advancements means Aussies are set to run out of cash in retirement

Posted by Matt Hale

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We think it’s time we all take an honest look out our superannuation system.  Why? Because put simply, it’s out of date.

When compulsory superannuation was introduced in 1983, statistically speaking the average person would only need to support themselves for sixteen years after they retired at the age of 65.The situation today is completely different with one in four men living in to their 90’s and almost half (40%) of women doing the same.  Medical advancements and technology are only going to get better in the coming years so the reality is that most Gen Y and Gen X’s have a long life ahead of them that their superannuation balance will not necessarily match up to.

So what does this all mean?

It means that we all need to start planning and preparing for this new reality so that we can ensure that we are in a position to continue to enjoy our lives right up until the end.Relying on the Age Pension to save the day when you run out of cash unfortunately isn’t really feasible given that it’s only around $400 per week for singles and $600 per week for couples.  The average Aussie couple require around $1100 per week to have a “confortable” so half that on a pension isn’t really going to cut it.

So what can we do about this? Here are my top tips for how young people can effectively plan for a long and enjoyable retirement.

  1.    The early bird catches the worm so start contributing to your retirement fund in your twenties and take advantage of compound interest and lower tax rates.  Likewise, if you’re older remember it’s never too late to start because the government allow you to contribute up to $35,000 into your Super in a single year!
  2.    Talk to your financial planner about finding the right investment mix for you while you’re young and have time on your side. Higher risk often yields higher returns but the possible benefits generally only out way the risk when you’re in you’re 20’s, 30’s and 40’s and still a long way from retirement. It’s a good idea to take most of the risk off the table when you start to near retirement because you need to protect what you’ve spent all those years saving.
  3.   Don’t forget your better half when they’re out of the workforce.  Whether it’s a new child, a redundancy, or unpaid study leave, BOTH of your retirement savings should never stop accruing.  That means that if your partner isn’t working don’t forget to make regular spousal contributions (don’t forget to claim your tax rebate of up to $540 along the way)