Retirement will be a long time coming

Baby Boomers are expected to live to a ripe old age, but few are financially prepared, writes

AGEING Australians are failing to plan for longer lifespans, putting their retirement finances at risk.

A new report by National Seniors says only half of older Australians have made financial plans for living longer, even though 85 per cent are aware that life expectancies have increased.

“Having no plans for increased survival is also a national economic issue because of the larger numbers of Baby Boomers now reaching older ages,” says the report.

Lead author John McCallum said life expectancy at age 65 had increased by about six years since the 1980s. The latest government figures show a 65year-old man can expect another 19.6 years of living, and a woman, 22.3 years.

Only 3 per cent of more than 5000 older Australians surveyed by National Seniors say they plan to spend more money in later life. “Medical and aged care bills tend to get higher as we get older, and few people are ready for this,” Professor McCallum said.

“Australians have a negative view of later life and don’t think seriously enough about it.”

Some people who had not saved enough money for retirement were depressed, or even suicidal, the report found. For most people, their only significant asset was their home, which could create family tensions if used to provide money later in life, it found.

Professor McCallum said many seniors were interested in new options for saving, such as introducing longevity insurance in superannuation to maintain income after age 85, or getting people to pay 10 per cent of their savings at retirement to receive guaranteed income after 85. “Attractive options may initially need some government incentives and, maybe, compulsion,” he said. Goldsborough Financial Services director Brenton Miegel said many older Australians simply did not think about life after 85. “A lot are in a position where the planning they are doing is perhaps for the next 15 or 20 years of retirement but they don’t want to think or worry about what’s beyond that time frame,” he said.

“For a typical couple in their mid-60s, statistically, one of them will live into their 90s.”

Mr Miegel said it was important to think about the implications of moving into an aged care facility.

Seniors need to consider whether they will keep their family home and who will pay the refundable deposit of potentially hundreds of thousands of dollars. Australia’s aged care has evolved to become more of a user-pays system in recent years.

Mr Miegel said options to finance the later years of retirement included annuities that could provide a set income for life. Reverse mortgages allow seniors to draw down on the equity in their homes. But these can be complex and interest compounds and eats into borrowers’ future equity.