by Vanessa Stoykov
When you read the research done by social researcher Mark McCrindle, you start to get your head around what will be, without a doubt, a very different Australia to the one we live in today.
And if you are close to my age (44) you also start to get a realistic sense of what life will be like in 30 years when we have retired. What really worries me about these numbers is the alarming statistic that shows there will only be 2.4 people working, for every person retired.
The burden on our children, and future generations, to support this retired population will simply be enormous.
This is why Australia is expecting at least 50 per cent of the population to self-fund their retirements. And why I also know, that at current rates, this is unlikely to be the case.
The numbers for a comfortable retirement are big. So big, that most people simply don’t bother to get their head around them until it’s too late. In our upcoming TV show, which will air on Channel 9 in October, we take a 37 year-old celebrity through a wealth transformation journey. And one of the first things he finds out is that if he wants to live on $80k per year in retirement, he is going to need $3 million saved to achieve this.
The look on his face when our financial adviser revealed this said it all. It seems like an impossible number. Sure, he can downsize his home, but he still has to buy somewhere to live, or face paying rent into the future and need more money to support that core cost of living.
When I talk to my friends about this issue, there is a look of sheer panic, particularly with the women. Nobody wants to be a burden on their children, and most people I know who have kids want to leave them some kind of legacy to make life a little easier.
We are all going to be living longer, and will need our money to stretch further. We are also going to be working for longer, as if we retire at 65, this could mean another 30 years of funding ourselves with no income.
The age pension as it stands at the moment will simply not be able to cope with the sheer numbers of people heading towards retirement. The belief that the government will pay is fanciful as the government only works on taxes paid, and there simply won’t be enough people earning money to pay the amount of taxes needed.
This conversation is sobering, but in my mind, it’s also a massive opportunity. For Generation X and Y, there is definitely still time to do something about it. Some of us will receive an inheritance, and how we spend or save it will be critical to the future prosperity of Australia.
For financial advisers, it’s critical to paint a pathway of how this comfortable retirement can be achieved: with good planning, a clear pathway and key milestones.
It’s time to get out of the daily bad news cycle and think bigger Australia – our very survival depends upon it.
About the author, Vanessa Stoykov:
With over two decades of experience in the wealth creation space, Vanessa Stoykov is a finance and money expert with a passion for storytelling.
Vanessa is the Founder of No More Practice Education, a leading on-line financial education hub, which was acquired by ASX listed company OneVue in April 2018. She is also the Founder and Chief Executive of production house evolution media group, creator of the Channel Nine’s Learn from the Money Masters: The Investment Series, and author of ‘The Breakfast Club for 40-Somethings’ - a fable that offers a new and entertaining way to change people’s long-term financial behaviours published by global publisher Wiley.
Vanessa is a regular contributor to Morningstar and Body+Soul, often appears on Channel Nine’s Today Show, and has recently been featured in numerous publications including News.com.au, Daily Telegraph, CEO Magazine and Money Magazine.
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Comments11
"response to victim, Are you a victim of a whittaker mcnaught adviser? Please advise as I have a lot of information on possibly one of Australia's biggest cover ups "
John 13:27 on 29 Sep 18
"Hi Peter, Funny you should mention Noel Whittaker. Another "celebrity" adviser whose Whittaker Macnaught was bought by BankWest/CBA then closed because it required "discrete management, governance and operational structures" that the CBA didn't like. https://www.wealthprofessional.com.au/news/big-bank-closes-advice-firm-174892.aspx very smelly..."
Victim 11:50 on 30 Jul 18
"Clearly not helpful at all. Financial advisers making hysterical claims to generate business, (or interest in a TV programme !), is exactly why we needed the Royal Commission. Noel Whitaker has some excellent calculators on his web site. $3m at 5% p.a. would last 100 years... (assuming an $80k drawdown rising at 2.5% p.a.). Thus, unless the "celebrity" is planning living until 165 years of age, they will have nothing to worry about. "
Peter 09:43 on 30 Jul 18
"I have just watched the first episode of the show and this clearly states that $2 milion in savings, not $3m, would be need to fund $80k income in retirement. The $3m relates to funding the future life style of the celebrity. I would suggest that some of those numbers would not apply to the "average man in the street". I am a great supporter of seeking financial assistance and did so myself to my great advantage. The figure of $3m is certainly mentioned in the show but it has not been correctly represented in the article. Reading the comments attached to the article it may well be counter-productive. I would suggest that going through the same process with an "average earning" would indicate that a good financial planner could help anybody, not just a celebrity with $3 million."
Peter 12:38 on 29 Jul 18
"For those who questioned the number $3m needed for retirement , please watch the show I was referring to in my article. You can see it Learn from the Money Masters here: www.theinvestmentseries.com.au/show "
vanessa stoykov 23:11 on 28 Jul 18
"I believe that historically "financial gurus" have overstated the amount of savings to fund a comfortable retirement. If I read this article correctly we are being told that to fund $80k per year for 30 years savings of $3 million are required. This is clearly fallacious. If the $3 million is put under the bed and $80k taken each year then my arithmetic tells me that $2.4 million would have been removed and there will be $600k left. Whilst this ignores inflation (which the article does not mention), it also ignores the earning capacity of the original $3 million and assumes that the average life expectancy will have risen to 95 years. If retirement ages are to rise than it would seem likely that life expectancy may actually fall. I would be most interested to see how the figure of $3 million is calculated. "
Peter 19:47 on 27 Jul 18
"I'm all for making people aware of the hard financial journey ahead of them during retirement, but I can't see how someone would need $3m to support $80k per year. $3m invested with a 1% ICR would only need to make 3.7% each year to provide $80k, which would also mean passing on a $3m asset to their beneficiary.. Even if you factor in indexation etc I still think you've largely miscalculated the required investment amount... "
Clint 15:49 on 27 Jul 18
"Hopefully it won't matter that there will only be 2.4 people working for every retiree in 30 years (even though we're told we'll be working longer - is that taken into account?). By then surely most people will be self funded via compulsory super?"
Wil S 15:24 on 27 Jul 18
"All the "best" planning is still predicated on the economy growing. "Real" growth isn't achieved anymore - just numbers on a screen. I'd put my money into land, they don't make more of that!"
Malthus 15:20 on 27 Jul 18
"I'm not sure how Vanessa got to $3 million in retirement capital to generate $80,000 pa indexed for inflation for 30 years? Paul Clitheroe said if someone retired at 65, invested money in a balanced fund and wanted to live off their capital for their statistical life expectancy about 20 years at the moment for someone who is 65 then they need 13 times their income (in this case $80,000 pa) which gives you a figure of $1,040,000!"
Daryl La' Brooy 14:58 on 27 Jul 18
"Did the financial adviser forget that his asset base would be generating income? Or was he retiring at age 37 and living off 80k a year?"
Darin 14:49 on 27 Jul 18