We all need to start sav­ing

Tweed Daily News - - NEWS - MAK­ING MONEY PAUL CLITHEROE Paul Clitheroe is a found­ing di­rec­tor of fi­nan­cial plan­ning firm ipac, Chair­man of the Aus­tralian Govern­ment Fi­nan­cial Lit­er­acy Board and chief com­men­ta­tor for Money Mag­a­zine.

AUS­TRALIANS to­day need to do some­thing our par­ents and grand­par­ents didn’t even think about – plan for a long life, and a new re­port shows the ben­e­fits of plan­ning for longevity go be­yond money mat­ters.

Aus­tralians en­joy one of the long­est life ex­pectan­cies in the world. Around 3.7 mil­lion of us (15% of the pop­u­la­tion) are aged 65-plus, and to­day’s 60-some­things can ex­pect to live for an­other 20 years on av­er­age. That’s an in­crease of more than eight years for men and al­most 10 years for women since the turn of the cen­tury.

How­ever, a new study by Na­tional Se­niors Aus­tralia (NSA) shows that our sav­ings be­hav­iour is not keep­ing pace with in­creas­ing life ex­pectancy.

The chal­lenge of age­ing is sim­ple – in the­ory at least. We need to make earn­ings from 40 to 50 years in the work­force ex­tend across 80 to 90 years of liv­ing.

The NSA re­port high­lights a key prob­lem with this: We have a ten­dency to take the present more se­ri­ously than the fu­ture, and that means we of­ten fail to save enough to pay for later life.

The same study found that what mat­ters most to peo­ple about their fi­nances in re­tire­ment is hav­ing reg­u­lar, con­stant in­come. Con­serv­ing cap­i­tal to leave money for the next gen­er­a­tion is be­com­ing less of a con­sid­er­a­tion for many Aus­tralians.

None­the­less, many of us ex­pect to main­tain sim­i­lar spend­ing pat­terns in re­tire­ment as we did in the work­force.

Crunch time of­ten comes as we head to­wards re­tir­ing age, and the re­al­ity of what may be a lim­ited nest egg be­comes more ob­vi­ous.

We also have a ten­dency to make plans for travel and leisure in early re­tire­ment. How­ever, it pays to look a lit­tle fur­ther over the hori­zon and con­sider how you will meet aged care costs be­cause chances are, ei­ther you – or your fam­ily – will need to pay for them.

It all high­lights the need for good plan­ning.

The NSA found that peo­ple who have no plans to deal with an in­creased life­span are more likely to ex­pe­ri­ence fi­nan­cial, so­cial and emo­tional dis­ad­van­tages.

I’m pretty sure that’s not the out­come you want for your re­tire­ment. Thank­fully there is a so­lu­tion. Part of the an­swer lies in com­mit­ting to sav­ing for re­tire­ment while you have enough in­come to do so. But it also hinges on how you use your su­per and other in­vest­ments once you leave the work­force.

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