The financial risks posed by Australia’s ageing population are not a new revelation.
For decades, policymakers have been trying to keep retirees off the age pension, with one of the more significant moves being the Keating government introducing compulsory superannuation in 1992.
This year’s federal Budget was another strong sign that retirees will soon need to rely on their own savings more than ever before.
Although there has been progress since compulsory superannuation was introduced, the risk of longevity continues to escalate, and SMSF trustees are not immune.
The average life expectancy for Australians currently aged 65 is 85 years of age, Lee Hayes, division director, Macquarie Specialist Investments told SMSF Adviser. For couples, there is a 50 per cent chance that one spouse will live to 90.
Further, there is a 10 per cent chance that the 65-year-old retiring today will live to 98 if single and, for a couple, that at least one member will live to age 104.
“An ageing population combined with increasing life expectancy means that advisers and clients must acknowledge the real and growing risks of retirees outliving their savings and experiencing income shortfalls in retirement,” Mr Hayes says.
Since submissions to the Financial System Inquiry opened, the retirement income debate has reached fever pitch.
One thing is clear from these submissions: change is needed at government, practitioner and individual level to grow Australia’s retirement savings and to suppress the financial risk posed by our ageing population.