Will you be ready for retirement?

Most people only start thinking about their retirement 5-10 years before they plan to retire. Unfortunately, once they start realising the reality of their financial position they generally wish they had started planning for retirement much sooner.

Our complacency towards retirement is most likely due in some part to our laid-back culture. Most Australians have the “she’ll be right” attitude and just trust and believe that everything will work out and ignorantly believe that they will be able to rely on the government pension and/or their superannuation to look after them in retirement.

Whilst we have a great education system in Australia, it does have a major flaw, in that it fails to give young Australians the financial literacy education they need to ensure that they know how to manage their money and invest for their future once they start the next phase of their adult life. With a lack of financial literacy education in Australia, many Australians learn how to manage their money through watching how their parents manage money. Now, you may have been one of the lucky ones who had parents and/or financial mentors who taught you about money and how to save and invest, but most Australian children grow up watching their parents struggle with money management and rely on the pension in retirement. Thus, these children accept this as their future reality.

Studies have shown that only 1% of Australians are currently able to independently retire (i.e. retire at any time they choose and maintain the standard of living they desire) and only 3% of Australians are currently retiring with annual incomes greater than $50,000 per year. The number that greatly concerns me is the 74% of Australians who rely on the Government pension to supplement their retirement income. What is even more concerning is that 2 out of 3 of these people are currently retiring on incomes less than $22,000 per year.

It is fair to assume that the 81% of people aged 65 years and over who must either continue working for financial reasons or have a retirement income of less than $50,000 per year, simply relied on the government pension and their superannuation rather than taking control of their own financial future. Because of this, many of these individuals would be experiencing a far lower standard of living than the one they desire and the one they enjoyed during their working years.

As life expectancy continues to rise to 95 for males and 97 for females by 2050, many of us will spend more than a quarter of our lives retired. So, it is essential that you think about the retirement you want and how you will fund your retirement well before you plan to retire.