How Will You Fund Your Retirement?

When you read the research done by social researcher Mark McCrindle, you start to get your head around what will be, without a doubt, a very different Australia to the one we live in today.

And if you are close to my age (44) you also start to get a realistic sense of what life will be like in 30 years when we have retired. What really worries me about these numbers is the alarming statistic that shows there will only be 2.4 people working, for every person retired.
The burden on our children, and future generations, to support this retired population will simply be enormous.

This is why Australia is expecting at least 50 per cent of the population to self-fund their retirements. And why I also know, that at current rates, this is unlikely to be the case.

The numbers for a comfortable retirement are big. So big, that most people simply don’t bother to get their head around them until it’s too late. In our upcoming TV show, which will air on Channel 9 in October, we take a 37 year old celebrity through a wealth transformation journey. And one of the first things he finds out is that if he wants to live on $80k per year in retirement, he is going to need $3 million saved to achieve this.

The look on his face when our financial adviser revealed this said it all. It seems like an impossible number. Sure, he can downsize his home, but he still has to buy somewhere to live, or face paying rent into the future and need more money to support that core cost of living.

When I talk to my friends about this issue, there is a look of sheer panic, particularly with the women. Nobody wants to be a burden on their children, and most people I know who have kids want to leave them some kind of legacy to make life a little easier.

We are all going to be living longer, and will need our money to stretch further. We are also going to be working for longer, as if we retire at 65, this could mean another 30 years of funding ourselves with no income.

The age pension as it stands at the moment will simply not be able to cope with the sheer numbers of people heading towards retirement. The belief that the government will pay is fanciful as the government only works on taxes paid, and there simply won’t be enough people earning money to pay the amount of taxes needed.

This conversation is sobering, but in my mind, it’s also a massive opportunity. For Generation X and Y, there is definitely still time to do something about it. Some of us will receive an inheritance, and how we spend or save it will be critical to the future prosperity of Australia.

For financial advisers, it’s critical to paint a pathway of how this comfortable retirement can be achieved: with good planning, a clear pathway and key milestones.

It’s time to get out of the daily bad news cycle and think bigger Australia – our very survival depends upon it.