THE reality is that people are going to need to work for longer.
It’s almost inevitable that we’ll reach a stage where 70 rather than 60 becomes the average retirement age.
Recent changes to the age pension mean two things: it will increase more slowly over the years and you will be older before you can receive it.
The pension age will soon rise by three years, from 67 in 2023 to 70 in 2030.
Given that two in three Australians aged 65 or older rely on the aged pension, this move will affect a lot of people.
Further, the preservation age for accessing super will jump from 55 to 60 years by 2024.
So, for a start, the rules around super and the age pension will encourage you to work longer.
As things stand, most of us can’t fund 35 years of retirement.
In the future, our retirements will be longer because we’ll be living longer still.
By 2050, the number of Australians over the age of 85 will more than triple.
Children born today will live well into their 90s.
The number of Australians older than 75 will increase by four million – roughly the population of
Sydney or Melbourne – over the next 50 years.
And Treasurer Joe Hockey made the observation that the first person to live to 150 might already be born.
This will obviously pose big challenges in terms of growing health care and associated social support costs.
The health spend of an 85-year-old is more than four times that of a 50-year-old.
It will also make saving for retirement more difficult.
So, regardless of policy, the reality is that it’s simply going to take us more years of earning to cover the cost of longer retirements (even if they are partly subsidised by the age pension).
Working longer will provide more years to accumulate savings for retirement; and leave fewer years of retirement to finance.
Though I’ve framed this as an imperative, it’s important to remember that health experts constantly tell us older people who
work are generally healthier (and happier) than non-working older people.
In fact, many older Australians are not remotely sick or doddery – and they actually want to stay in the workforce.
It’s an opportunity to maintain and grow their skills and to preserve a sense of daily purpose.
It’s also a chance to contribute their skills and experience to society.
So, this scenario where we work longer is not necessarily the doom and gloom it might first appear to be. But to make it work we’ll need enormous changes, not just economically but also socially, medically, technologically – and so on.
Importantly, while I’m sure responses and innovations are being considered and, in pockets, acted on; for far too long, the challenges of an ageing workforce have been simply bandied about.
I have seen little evidence of any positive, significant or real response to the challenges arising.
It’s time we actually did something.
* This information is of a general nature only and does not take into account individual needs, circumstances or objectives.
Individuals should assess their own financial situation and seek professional advice before making a decision.
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