The recent calls to increase the pension age should serve as a shot across the bow to anyone of working age who hasn’t fully considered how they will fund their retirement.
There’s a fair case to suggest you won’t be having it as good as the generation that retired before you.
The report from The Productivity Commission recommended the government increase the age that people can access the pension to 70 by 2035.
Besides that recommendation, there was also mention of an equity release scheme so seniors could tap the equity in their homes to relieve pressure on the taxpayer.
The Grattan Institute followed, releasing a report including similar recommendations, only this time advocating the family home is included in pension means testing.
Ignoring our existing government debt, the reality of increasing health and welfare costs ensure the situation can only get worse as revenues fall and unless measures are taken, taxes will have to increase to make up the shortfall.
That’s the reality of a large number of expected retirees and our ever increasing life expectancy.
Back when the age pension was introduced the average male life expectancy was 64 and the pension age was set at 65 – not hard to figure out the intention there!
While there’s little chance we’ll soon see the pension age lifted out into the 80’s to reflect our current life expectancy, despite denials, governments will inevitably be making some unpopular choices.
And for your personal budget, being mindful of this now will be prudent planning.
Anyone wanting to retire early should be especially mindful of saving a lot more, a lot earlier, especially if you believe you’ll be physically clapped out from manual labour.
The regulatory risk around superannuation again appears high so there may be a case for diversifying where assets are held.
The most important thing – don’t say you weren’t warned.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL/ACL 224543, www.mfg.com.au This information is general in nature and readers should seek professional advice specific to their circumstances. Looking to reach your goals with one of Australia’s highly rated financial advisors?
