Retiring – and plotting a path to a comfortable retirement – is not what is used to be. The simple reason is that we are living longer.
In fact, it’s quite dramatic; life expectancy is increasing by about two years every decade, and average lifespan around the world has now doubled what it was 200 years ago.
So not only is it adding a complexity to Australians doing their own sums around “how much do I need” and “when can I retire”, it is actually throwing governments into a spin.
You may have read this month (March, 2015) that the latest release of the Intergenerational Report shows Australians born after 2055 are expected to live until the age of almost 100 years old.
Close to 40,000 Australian men and women will have reached the age of 100 by the middle of this century. And, as the report noted, only 122 people were 100 or older in Australia in 1974-75.
So courtesy of advances in science and technology – and better education – the demographics of Australia are massively changing and putting economic pressure on the national budget.
This has been the reason you are seeing headlines and stories about politicians calling, demanding, asking and begging for Australians to stay in the work force past the traditional 65 years of age for retirement.
Again, the simple reason is that with more older people not working there would be less people working and paying income tax – and the scales tip the wrong way for the nation’s coffers.
So what does it mean for everyday Australians shrewdly planning their after-work-life?
Well it’s all about those numbers.
If you retire at 65 and your life expectancy is 95 then that’s 30 years you would theoretically need to fund in retirement. If you determine you need $70,000 a year to make that a very comfortable retirement, then it’s more than $2million you would need to fund that level of retirement.
That’s being very simplistic and of course there are nuances and tweaks that need to be factored in for each individual, such as leaving behind money for children, and other considerations.
Planning for this optimal moment to retire is critical and you will want to maximise the financial number you can get to before pulling up stumps by making wise investment choices.
It’s never too early to start planning and it’s actually good practice to start considering what your requirements may be in those later years as it can also help you make healthy lifestyle and financial choices in the short term.
Hard work now will give you ongoing freedom and independence in years to come.
Like anything, what you put in is what you can take out, so start putting in.