Ex­tend­ing the re­tire­ment age

Will this lead to more tax­pay­ers or more un­em­ploy­ment?

Finweek English Edition - - INSIDE - BY LISA ILLING­WORTH

On the back of the re­cent news that Aus­tralia’s federal trea­surer, Joe Hockey, i s rais­ing t he na­tional re­tire­ment age from 65 years of age to 70, many other First-World coun­tries are fol­low­ing in Aus­tralia’s foot­steps. Ger­many is set to raise the re­tire­ment age from 67 to 76 and in Spain and Greece the re­tire­ment age has re­cently been in­creased from 65 to 67 years of age. The UK has in­creased the age to 68. Apart from the ob­vi­ous need for in­di­vid­u­als to plan for a later re­tire­ment, the ef­fects are far reach­ing – more so than just be­ing able to save for a few ex­tra years.

Says Sandy van der Zan­den of Pioneer Fi­nan­cial Plan­ning: “With the con­tin­ued med­i­cal ad­vances people are liv­ing longer to­day. This can have a dev­as­tat­ing im­pact on your re­tire­ment plan­ning as the cost of health­care in­creases dras­ti­cally in re­tire­ment – people are liv­ing longer but with an in­creased need for on­go­ing med­i­cal treat­ment and care.

“The ex­tra years of in­come needed due to in­creased longevity also come into play when plan­ning your re­tire­ment. De­lay­ing re­tire­ment by even a year or t wo can have a sig­nif icant im­pact on your fi­nances in re­tire­ment. The ef­fect is twofold: you can pre­serve cap­i­tal while you are still work­ing as you don’t need to draw an in­come, and you have ex­tra time to save and in­vest funds for your re­tire­ment years to come. This may seem ob­vi­ous but the ef­fects can be quite sig­nif­i­cant.

“For ex­am­ple, take an em­ployee earn­ing R30 000 per month. Over one ex­tra year of work­ing, that is R360 000 that has not been drawn from cap­i­tal [as you are earn­ing an in­come]. In ad­di­tion let’s say you save 15% of your in­come, which equates to R54 000 over the year. That

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