Defusing a retirement timebomb
Our aging population is going to bankrupt the country unless we do something about it.
The geezer was bald. Brown liver spots were scattered over his scalp. Rheumy eyes peered out from behind thick glasses. His teeth were yellow, his hair grey, his jawline melting into his neck.
That old bloke was me. Makeup artists had aged me up so I could see what I’ll look like when I’m 70.
It was confronting. I knew it was all special effects, but staring in the mirror at that wrinkled but familiar face, I realised: I’m going to get old. It’s unavoidable.
Facing the prospect of aging is always a little depressing. Getting old means slowing down, giving up stuff, and eventually dying.
Maybe that’s why we don’t think about it as much as we should. It wasn’t until I saw my 70-year-old face that I really confronted the fact. I think confronting aging is something we need to do as a country, too.
New Zealand is getting older. Currently, 15 per cent of the population is over 65. By 2048, experts predict that number will have risen to 24 per cent. That means that under the current NZ superannuation rules, 1.4 million people – almost a quarter of our predicted population – will be getting the pension.
The number of people paying taxes will decrease in proportion to the number of people receiving the benefits of them. We already spend $12 billion on the super every year – more than what we spend on all the other benefits put together. That number’s only going to get bigger as the baby boomer generation retires. Healthcare costs will also increase as more of us live longer.
In 2013, Treasury put together a document called ‘‘Affording Our Future’’ that looked at whether New Zealand would be able to support its aging population. It’s conclusion? We can’t.
If nothing changes, keeping our retiring population healthy and supporting them financially will bankrupt the country some time in the 2020s. We’ll have to borrow so much money we’ll end up like Greece.
‘‘Affording Our Future’’ suggested raising the retirement age to 67 as part of the solution to the problem. If that’s necessary – and all the evidence suggests that it is – we need to do it sooner rather than later. The longer we leave it, the harder it’s going to be.
The trouble is, raising the retirement age is a hard sell for politicians trying to win votes at election time. Many people, for perfectly understandable reasons, don’t like the idea of being forced to work an extra two years. But if we want to avoid disaster, I think we need to look past our own interests and vote responsibly.
Aging is not just a problem for the government, though. The pension’s only enough for the bare essentials – to have the retired life many of us want, we need savings of our own.
When I used a retirement calculator to figure out how much money I’d need to afford my idea of a good retired lifestyle, I was shocked to discover I need to squirrel away $1.2 million by the time I plan to retire. That’s more than $1000 every week. It ain’t going to happen.
Even after adjusting my expectations, I still need to save $471 each week, which won’t be
The trouble is, raising the retirement age is a hard sell for politicians.
easy. It’s almost like by the time you realise retirement’s not a million miles away, it’s too late to do anything about it.
The Commission for Financial Capability ran a competition where they asked New Zealanders to come up with names for the three stages of retirement. (The fact that we need to break retirement up into three stages shows just how long we’re now living.) The competition’s winner, Wellington retiree Erica Whyte, called the stages discovery, endeavour and reflection.
‘‘When you first retire, you’ve suddenly got this whole day, and you have to discover how to fill it meaningfully. Then endeavour, you then have to try to make some of those new discoveries work out in a different environment, and then ultimately there’s a lot more time to think about what life has been, and I call that one reflection,’’ she says.
For a fulfilling retirement, though, we need money, and lots of it. For many retirees, your house is the nest egg that’s going to keep you going in your old age. You sell it, likely for far more than you paid for it, downsize, and live off the profits. But what’s going to happen to the growing number of Kiwis who are locked out of the property market, and will rent all their lives? What are they going to have to fall back on if their retirement savings run out?
Many of us (myself included) aren’t saving nearly enough for a comfortable retirement. Why is that?
Maybe we just haven’t been taught how important it is. But the kids in teacher Vicky Crawford’s classes at Albany Senior High School are learning how to manage their money so they don’t have to spend the end of their lives in poverty thanks to their school teaming up with the Retirement Commission.
I can just about guarantee these teens know more about KiwiSaver than you.
Sometimes we feel like saving for retirement is throwing the money away. That’s not true, though: you’re spending it on a future you.
Retirement Commissioner Diane Maxwell says we should think about each bit we save like we’re buying our future selves a coffee.
Old me looks like a grumpy geezer, but he’s probably all right. I think I’ll buy him a coffee or two.