In 2001 in Australia, the number of people aged 65 or above amounted to 2.4 million, which represented 12.4 per cent of the Australian population. However, by 2051 this figure is expected to increase by about 26.1 per cent to touch 6.5 million.
More importantly, life expectancy in Australia at the turn of the century was 45 years for men and 46 years for women. It currently stands at 75 years for men and 81 years for women. With the length of average retirement years increasing, depending on the Government-provided Age Pension to support you through your retirement year is not a very comfortable idea financially.
Retirement planning, as part of your overall money management plan, is essential if you want to ensure that you can afford to live in comfort during your retirement years.
The Ageing Population and the Pressures on the Government
According to the 2010 Intergenerational Report, the proportion of people who are of working age is expected to fall by 2050 with only 2.7 people of working age for each Australian aged 65 and above. This compares to the 5 people of working age for every Australian aged over 65 in 1970.
Such disparity is going put substantial pressure on the Australian economy, government finances and living standards over the coming 40 years. Moreover, an aging population will also increase pressure on our already-overburdened health systems. With such a large number of people falling into the aged pension age group, it is going to be hard for the government to support everyone sufficiently. This may lead to stricter eligibility criteria or perhaps a removal of the Age Pension altogether!
Even if you are entitled to the age pension, the amount you receive will be dependent on your age and it may well not be enough to fund the lifestyle you are used to. If you want to ensure that you are not left out in the cold during your retirement years with only your age pension cheque in your hand, you should start your retirement planning immediately.
Since the government is in no position to support everyone adequately, you should consider approaching your financial advisor for guidance regarding your retirement planning. As we now live longer, it is up to us to manage our finances and we need to pay particular attention to funding for our retirement years.
Your financial advisor can help you decide the best course of action for you and they will come up with an effective money management plan based on your financial condition and requirements. As part of your retirement planning, your financial advisor will also suggest whether you should opt for income protection policies, whether to invest in superannuation, etc. to ensure that you have a smooth and steady flow of income even in your retirement years.
So take action now to protect your retirement years and make them more comfortable.
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