Aussies Living Longer, Need More Savings

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New data shows that retirees are not accurate in their expectations about the length of their lives and are not making adequate provision for their savings coffers. Going on current mortality rates is not an accurate prediction say the experts, people are actually living for longer than the statistics suggest.

A government actuary says that boys born in 2010 would live to the age of 92.4 and girls to 93.9, and that living to 100 was easily within reach for many people. Currently life expectancies are 79.5 years of age for men and 84 years of age for women.

What it means in money terms of course is that you really have to make sure you are saving up enough to enjoy your years of extended retirement. And that is significant because the extra years are getting added on after retirement, increasing the ration of non-working to working years. The question that hasn’t been posed yet and could be worthwhile looking into is perhaps, should people be working later on in light of this?

The statistics are interesting in light of the Treasurer’s announcement that wealthier locals would experience their tax concessions being reigned in as the government explores ways to protect the country’s $1.5 trillion pension system and make it more viable over the long term. Earnings paid out to retirees in excess of $100,000 per annum from super funds will now also be subject to 15% tax. The reforms will affect 20,000 people and will be saving $900 million for the economy over the next four years.

The Treasurer alluded to the fact that locals were living longer and noted that any reforms that were introduced needed to be to improve the sustainability of the country’s superannuation framework.

The country’s retirement savings is the fourth largest fund under global management. As such tax concessions are approximated to value $32 billion for 2013’s fiscal year. Effective from 01 July this year locals aged 60 and over will be able to contribute up to $35,000 to their pensions on an annual bass at a lower tax rate. From July 2014 the concession will be mad available from a younger age and people over 50 will also qualify as options are investigated to make savings easier and more sustainable to households that are already under a fair amount of pressure and as people compare health insurance policies and premiums to find the best solution for their needs.

The Association of Superannuation Funds of Australia has reiterated that reforms need to make provision for the ageing population and how it will start to affect the government’s budget in the not too distant future. The news also comes in the wake of the announcement about the increase in employer contributions to super funds. The current 9% contribution will be increased gradually to 12% by 2019. It starts the cycle of increases on 01 July when it increased to 9.25%.

The effect of the ageing population on employment, productivity and revenue generation mean that for every 10 people in retirement there will be 27 employed in the national workforce by 2050, a drop from 50 in 2011.

Some critics say the plan addresses sustainability but only partially. They do acknowledge that current savings are relatively modest because retirees have not been contributing significantly to their super funds to date. Future generations will have more substantial savings in their super funds by the time they reach retirement age. They also say that the interplay and synchronicity between the superannuation system and the country’s pension fund will be paramount to retirees being able to meet their financial goals when they give up work.