Who is going to pay for this?
Written on the 10 October 2011 by James Cagney
When Australians retire at 65 or 67 years of age (and don’t be surprised if the government increases this to 70 years before you can retire) you might be under the misconception you can sell your home, downgrade to a smaller home and live off the balance of your money. Pensioners are doing it tough and will do it even tougher as inflation takes a bigger and bigger slice out of their Super, savings and pensions. Think about it ....real estate prices are based on supply and demand so watch prices of smaller homes and apartments escalate as more and more retirees downsize over the next few years.
Many retirees will not be able to buy a smaller apartment they will have to rent for 10 to 20 years and subsidize their pensions with whatever they have left from the sale of their home. The average male in Australia retiring in 2011 has around $87 000 in Superannuation and females have on average only $16 000. So over 20 years in retirement this is $4 800 per year and $92 per week. So the government will subsidize the balance to equal $420 per week per couple. Not much to live on! Therefore most of the elderly today have to sell their existing home because the house and the garden have become unmanageable and the increased rates, utility costs, food, petrol, insurance etc are un-affordable. Then when they can’t manage on their own they go into a government sponsored retirement home for another 10 years or so. Who is going to pay for their medical care and retirement expenses as they live well into their nineties? Hard working Australians - that’s who (through increased income tax).
Therefore, in 1955 the government could afford to pay 80% of the average male wage because they were not many on the pension in those days and then they died usually after 3 to 8 years after retirement. This is very different to the scenarios today with the increasing number of pensioners and they are living longer and longer and costing the taxpayer more and more!
So what will we do? More and more Australians believe that they will simply have to continue working until the day they die. Well that is not going to happen either. Over a third of retirees today have had to retire because of health reasons – so you might not have the choice. So who is going to pay for the 25 to 40 years these retirees live on the pension and who is going to wear their medical expenses? Fewer and fewer hard working Australians - that’s who (through increased income tax)
Author: James Cagney