Not long ago a received the article below from a client - it's a good read and makes a very pertinent point, that the longer we live, the more we spend, so the more financial resources we will need to support our life and associated costs. The pension is not only insufficient but is not guaranteed to be here in it current form for ever, so we must take responsibility for our future and plan for it.
We are living longer! Perhaps it is time for a retirement planning and revise your retirement plans. Effective planning for retirement is essential if you want to live a lifestyle similar to your pre-retirement.
Last week I received the phone call everyone dreads. It was my sister. Our Aunt Jo had just passed away. She died peacefully in her sleep . The news hit me like a ton of bricks. I just sat and stared out the window for what seemed like hours.
I kept thinking about the last time I saw her.
Jo is my Granddad's sister. We're a close family and I can't remember a family event without her. Our family events seem to grow bigger every day. Everyone is always welcome, and it's not uncommon to have upwards of 40 people for birthdays or Christmas.
Jo's passing wasn't exactly expected. She was in her late 80s, but in seemingly good health. The news gave me pause and made me look inward for a while. Certainly, life is a precious
thing. In my moment of reflection, I made a realisation. I have five other family members all in
their 90s. I also had a great-grandmother who lived to 104!
Call it luck. Call it good genes. Call it what you will. Clearly people in my family have been blessed with long and happy lives.
For me it's great news. I hope to live a good long while. But the blessing is a double edged sword.
Because I'm likely to live a longer life, I'm also more likely to run out of money in retirement. My brothers, sisters and I all need to prepare for a longer more costly retirement. And that means thinking about our retirement planning a little differently.
Right now, the lifespan of a newborn baby is estimated to be 77 years.
If you plan on living to 87 it means you need to accumulate more retirement savings. Enough to support your lifestyle for an extra decade. Live to 100, and you might spend more years in retirement than you will working!
That's why when I think about my own retirement, I believe in three absolute truths. You may or may not agree with me, but here's how I think about retirement.
Firstly, I believe in taking full responsibility for my retirement planning, but I not expert. So I will need help..
Secondly, I want to live the good life in retirement, and not have to worry about running out of money.
The last absolute truth I believe in, is simply this... the government won't be there to help.
Think about it. "Most Australians would think that if they are being forced to save nearly 10 per
cent of their salary each pay cheque, that is going to look after them when they retire." says John Brogden, of the Investment and Financial Services Association. "The fact of the matter is that the vast majority of Australians are going to retire on less money than they can live on. They are going to get a rude shock when they realise that in their early 50s."
You see, not many years from now when our government's struggling to pay off our debts, they'll start cutting expenditures. One of those big areas is likely to be Social Security. It may not happen today or tomorrow ... but as for the next decade? But I truly believe when I get ready to retire, Social Security won't exist in its current state.
Some people have great expectations from the many reforms the Labor government initiated under Kevin Rudd, but these people are likely to be in for a rude shock, as the window of opportunity for action begins to close for the three major reviews looking at superannuation: the Ken Henry review of the tax system, the Cooper review into superannuation and the Bernie Ripoll inquiry into corporate collapses and the financial services industry.
The government still has no clear plans on how to deal with this. The Henry tax review with its connection to Treasury and super are proving the most politically sensitive & courageous, so serious doubt remains as to what, how much, in what way and when these reviews will be introduced, if at all.
If you work for the government now - at the state or federal level, or plan to rely on the social security system - have a back up to your pension plan. Most likely payouts and benefits will be cut.
Don't tell me it's not going to happen. Just look worldwide at the global financial mess. Take, for example, General Motors (GM) - if you'd have told workers back in the 1950s and 1960s the pension system would be underfunded and cutting benefits they'd have laughed. Now look at all the retirees struggling to make ends meet.
Don’t leave it until its too late….Talk the me today and put in place a plan to ensure that you have more for your retirement. It will be the best investment you will ever make.
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