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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).

Last year the first of the “baby boomers” retired. That is, those born in 1945 and there were 198,000 of them. About 187 000 of them claimed the pension. This will escalate to around 300,000 per year over the next few years and effectively add 3 million pensioners to the 2 million we already have in the next 10 years. That is Australia will have 5 million pensioners within the next 10 years. Add this number to the number of people on Social Security and we will have over 8 million people needing a hand-out from the government. In 2011 only have 22.5 million people in Australia with approximately 12 million in the workforce and we already have 5 million on Social Security right now. So who is going to pay for all these people needing social security and pensions? Hard working Australians - that’s who (through increased income tax).

You certainly do not want to live on the current pension , which is approximately 25% of the live able wage in Australia today. Our grandparents were able to cope because in their day the pension in was legislated at 80% of the average male wage. Lets look at this:

  • In 1955 there were 19 Australians working for 1 retiree and the average life expectancy for men was 67 and women 72 years old.
  • In 2011 we had 5 Australians working for 1 retiree and the average life expectancy for men is 79 and women 84 years old.
  • In 2030 there will be 2 Australians working for 1 retiree both men and women can expect to live into their late 90’s and some over 100 years of age.

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)

Working Australians are going to pay for the millions on social security or take action now before it is too late! Let us help you with your retirement plan before it's too late. We will show you how pay off your house quicker, save income tax, invest in secure assets and have enough money to be independently wealthy at retirement. The alternative is to keep paying more and more tax until you are broke at retirement. We will have licensed professionals who use time-proven and sound strategies to assist you to adequately planning for your future. Contact us by clicking >>>> here and we will get back to you without delay because time is of the essence. The longer you leave it, the harder it becomes. Do not say you will do it later because “one of these days is none of these days” - time is not your friend. The later you leave this - the more pressure you put on yourself. DO IT NOW!

For more information retirement, the shortfall of Superannuation and other articles about planning for your future click >>>here and scroll down to “Articles” or click on the "Recent Articles' below.

Please note:
The information featured in this article is general in nature and therefore should not be solely relied upon as a solution to your personal situation.Before making any investment, insurance or financial planning decision, you should contact and consult a licensed professional who can advise whether your decision is appropriate to you.

Author: James Cagney
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