19 April 2012

Like many western countries in the 21st century, Australia is facing significant challenges arising from our changing demographics. In short, our population is aging – due to a combination of increasing life expectancies and declining birth rates. The net result is that the average age of Australians is now significantly older than at any time in our history. This also has a notable impact on retirements, social security, aged care, life insurance and pension payments.

As pointed out in an interesting article by the Federal Finance Minister (Penny Wong), the needs of older Australians is starting to outstrip our ability to provide for them. Forty years ago there were 7.5 working Australians for every person over 65. Today there are only five workers per elder Australian and in 40 years time the ratio is expected to fall to just 2.7. Clearly the capacity for the working (and tax paying) population to support the retirees will diminish substantially.

It is therefore imperative that you try as hard as you can to provide for your own retirement. The likelihood that today’s social security provisions will be retained into the future is very low. Many Australians will find that they are retired for 20 – 30 years and will required a substantial income over that time to maintain their standard of living. It is not too early to begin planning for your retirement.