Fewer taxpayers and more people living in retirement means a ticking time bomb
The facts and figures are stark. In the past 50 years, the life expectancy of an Australian has increased to almost 82 years from about 70 years. During that time, the average number of births per woman has fallen to 1.9 from 3.5.
A man born in Australia today can expect to live almost 80 years, up from 77 years a decade ago. For women, the corresponding figures are 84 and 82.5.
According to the Australian Research Council’s Centre of Excellence in Population Ageing Research (CEPAR), female life expectancy at birth in Australia is forecast to be 89 by 2050. For males, the figure is 84.
By 2050, the number of Australians aged 65 and above will have hit about 7.2 million, up from 3 million in 2010, a multiple of almost 2.5. By contrast, the number of people of traditional working age, 15 to 65, will only be about 1.2 times bigger, rising to 19 million. That will mean the number of people of traditional working age for each person of 65 and older, the traditional retirement age, will almost halve from 5 to 2.7. This is somewhat unflatteringly termed the ‘dependency’ ratio.
This will hit the federal budget; there will be fewer taxpayers and more people living in retirement, the majority on the Aged Pension. Government spending on pensions is forecast to rise from about 3.4 per cent of gross domestic product, which measures the value of the goods and services we produce each year, to almost five per cent.
This increase would be bigger were it not for the compulsory superannuation system established by the Hawke and Keating governments, which has generated the world’s fourth-biggest pool of retirement savings.
That system, though, has also generated a false sense of security; most retirees, and the mass of baby bombers (born between 1946 and 1964 and currently aged between 49 and 67) heading towards the end of full-time employment, will rely on a pension after leaving the full-time workforce.
“Most people now aged in their 50s and 60s are very much underfunded for their longer lifespan… Many baby boomers, in fact about 60 to 70 per cent, will move into retirement and have to rely on a full or part Age Pension. That is not rich. And this will be the first generation to enter retirement with sizable home mortgages’’
The above is an edited excerpt from Kaye’s interview with Michael Short, of The Zone in today’s Melbourne Age and The Sydney Morning Herald.
What about you? Are you entering retirement – or already in it – and totally underfunded for your expected lifespan? Sadly, you’re not alone. But don’t think that this can’t change. This website is stepping up its advocacy on behalf of older Australians – particularly those who are facing a financial wipeout through no fault of their own.
And today you can join in online and debate the rights and wrongs of retirement income – why some seem to sail into retirement with a sizeable retirement nest egg but others enter years of struggle.
So you are welcome to respond by commenting below – but why not come online and have a chat in ‘real time’ instead?
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