Hi there, and Welcome!
Well pretty much the title says it all really. Many Australians are in a very poor situation facing retirement, as they have chosen to not invest or change their situation as a result of the ‘it’ll be alright, everything will work out …ill do something later’ culture.
Our lucky country is not what it used to be …. in the days when our Mums and Dads were making all the decisions, it was a truly different economy and outlook.
The facts are that we are living longer and our population is increasing significantly, every single year. That means that the retirement outlook from 30 years ago, is significantly different from today.
Back in 1960, people retired at 65, and only had to ration 5 – 8 years worth of retirement savings until they passed, go forward 50 years to 2016, and we need to plan for 20 – 30 years worth of retirement savings.
With more Baby Boomers reaching retirement age, you don’t have to be a rocket scientist to know that our Government is struggling to provide funds for our aging population with pensions. The age for retirement is already been proposed to be pushed back to 70 years from 2035.
So, what does this look like for the average Aussie?
Its important to look at this, because so often we push it out of our minds so we don’t have to think about it. The days of not worrying about it until you have to are over, and sticking your head in the sand is not helping matters.
Right now, it looks something like this:
So, if you have been working your entire life to pay off a mortgage, and have no other savings (other than Superannuation), which happens to be majority of Aussies retirement plan, then you will be living off $397.40 per week.
I don’t know about you, but that looks like a pretty ordinary existence to me. That’s barely enough to survive on food and basics, let alone any actual life enjoyment. Its also taking into account that you own your house outright, not renting.
So, for many Aussies, this is the outlook, that is even if the Government can afford a pension in 20 – 30 years time – the debate rages on in regards to this.
This ‘it’ll be alright mate’ attitude is endearing, but its not really practical or useful. In fact I would go as far as saying it holds us back from doing anything pro active about the situation. We would rather do sit back, put our head in the sand until such time that it truly gets put in our face that danger is lurking, and we now have to do something radical and high risk to change the situation.
‘Global accountancy firm Deloitte released a report in 2014, Adequacy and the Australian Superannuation System, which found that even for a comfortable lifestyle in retirement men aged 65 need to have amassed $340,000 and women $370,000.
For a single person who owns their own home, a comfortable lifestyle is set at about $813 per week, while modest lifestyles cost about $450 per week for single retirees.
To fund this, Australians need to save up to 20 per cent of the wage for up to 45 years.
But the average account balance falls alarmingly short of what is needed — for males aged 60 to 65 the average account balance is $114,000 and females $94,000.
The Federal Government is moving to increase the retirement age to 70.
Deloitte’s special superannuation adviser and report author Wayne Walker said changes needed to be made to the super system or Australians risked living a grim retirement.’
This short commentary is to inspire action, rather than to sit back and let the future happen to us. We truly cannot ignore the facts as they stare us right in the face.
For many years I listened to my parents, and their advice was always conservative and low risk. They would always say,” just get a good job, get a house and pay off the mortgage”. That’s pretty much it really. So for many years I just did just that… I got a good job which bored the hell out of me, got myself a house and started paying it off…and the rest of the time, well I just survived. I didn’t really have anything to show for it, other than paying off the interest off the house, and feeling like I was not moving forward at all.
My company speaks to thousands of Aussie families every year, who are under the same disillusioned investment strategy…’get a job, pay off the mortgage’, and hope that I have enough super to retire upon when I’m 65, or now 70! I think 90% of the people I talk to actually know or have a ‘gut feeling’ that they know that theire current plan or strategy is not going to be enough, and that they should probably do something, but haven’t.
Some families ventured out and tried some form of investment strategy, but maybe missed the mark through poor advice or trying to reach ‘the golden goose egg’ through high risk strategies. Maybe they feel a little burnt by the experience, and no longer have the appetite for investment anymore. I take my hat off to those people, sometimes its important to try, and make a mistake, rather than to not try at all. At least you can learn from the mistakes and make a better choice next time.
I think a lot of families simply don’t know what they have, and don’t realise that they can be an investor and use funds which they are sitting on.
Here is an everyday scenario….
John Smith and his Wife Mary, go to work everyday, they have been paying off their house for 10 years. They have a combined income of $100000+. They have $2000 in savings, and some small credit card debt with 2 kids at school. They have about $100k is Super that they know they cant touch till pension age.
When we talk to John and Mary, it comes a big surprise to them that they could actually use the EQUITY in their house to buy an investment property and start an investment property portfolio. That EQUITY is sitting there earning nothing, its theirs, but its doing nothing.
Equity is the difference between what your home is worth and how much you owe on it. For example, if your home is worth $300,000 and you owe $100,000, you have $200,000 in equity.
That equity can used to purchase an investment property for as little as under $40 per week. (* certain conditions apply of course).
The same ability to purchase could be valid for someone who has saved $50 – $60k and has regular income to service a loan (* certain conditions apply of course)
Many Australians never take the first STEP because of the following reasons:
What do we mean by a misaligned blueprint? It is the beliefs we absorb through ideas passed on from parents, influencers and peers as we were growing up.
Head in the sand mentality
Many people refuse to look at the future and just focus on survival day to day. Putting your head in the sand because the prospect of considering the future is intimidating will not change the outcome.
Most people I know have a negative story to tell about failed investments, and money that has been lost as a result.
If you take people’s horror stories to heart, you will never take action.
It is too confusing / I don’t know where to buy
Sometimes people start to take action, but get really confused with all the different opinions about where to invest. This confusion can lead to stress, frustration and ultimately to not taking the next steps.
Fears about losing money
There is a real fear factor for many first time investors (FTI), and that fear factor is normally in regards to borrowing more money from the bank.
The FTI is typically concerned about getting further into debt and restricting their freedom.
Confusion about their position
A lot of people we talk to every day do not realise that they are actually in a position to invest at all.
Fear of failure / fear of success
All families have a history, and that history can sometimes lead to inaction or bad decision-making.
Many people feel that their future is already written. Their parents were poor, their grandparents were poor, and as a result it become a family narrative that we must ‘struggle to survive’ – and that is just the way it is.
The ever-popular statement ”I’ll wait until next year, when the market is better” is something I hear all too often. Another popular one is “I’ll do it when things settle down at home” or “as soon as I get a job that pays more!”
Whatever your reasons are for NOT taking action sooner, then today is the day to take some form of action. Whats the worst that can happen?
The worst thing that can happen is that someone says, “NO, you cant invest right now”, well at least you know, and even then, you can sit down and work out a plan on how to put yourself into a position to invest in the future.
The first STEP for me is the easy one…..ask a professional to assist you to work out if you are in a position to invest or not. That means looking at your financial situation, facing it, and putting a plan together. It can be scary sometimes to have to face the situation, but trust me, you will be far better off knowing what you can and cant do, than leaving it too late.
The first step is a simple one. Look at your current financial standing and see whether its possible to invest or not. If its a NO, then start a plan to head towards it.