The End of Retirement

A while back, I wrote about the coming en masse Boomer (1943-1960) retirement and how it is likely to affect the economy. Today, after reading the post and comments about The Grey Tsunami over at Down To Earth, I’d like to take that thought process one step further.

I’ve previously discussed how populations in industrialised nations are ageing. As an example, the number of people aged 65 or older in Australia will increase from 2.9 million to an estimated 7.4 million by 2049. The percentages are similar for most of the wealthy nations.

Additionally, mounting government debt poses a painful choice for developed countries; either a deep reordering of public expectations about everything from the retirement age to tax rates, or slower growth. In all likelyhood, it will be both.

Raising retirement age

The growth in the proportion of older people has major implications for the aged pension and for Federal and State budgets if taxation revenues were to shrink. If we were to ensure the proportion of five people of working age for every one retired was maintained, retirement ages would have to be lifted dramatically in the decades to come. There is no question that difficult decisions will be required.

To keep the economy moving in the face of a greying population, the Business Council of Australia (BCA) has recently called for the retirement age to be raised to 73 by 2049. I’ll be 72 in 2049, so this will very much affect the younger Gen X (1961-1981) and Millennials (1982-??).

The best way to deal with this issue ( from the government’s perspective),  is to raise the retirement age so you can’t begin drawing your old age pension till later …….preferably not before you die. This keeps you paying into the system longer without drawing any benefits.

Superannuation (401K) will not save us

It turns out Australians face a collective $695 billion “shortfall” between what they’ll have to retire and what they need. A professor at the National Centre for Social and Economic Modeling pointed out the following in an Age article:

  • The average super account balance for males aged 60 to 64 is $135,000.
  • For females it is $62,000.

But, apparently, the average isn’t terribly descriptive, because of a minority with very large Super balances. So, let’s check out the medians instead.

  • The median balance for men is $33,000
  • The median balance for women is a big fat 0.

So, half of women have no super. Please let that sink in. Here is the link to the article again. It’s still 0 when you read it a second time. Of course, this is misleading, as it includes those women well before retirement.

  • the median account for men aged 50-59 is $44,000
  • the median account for women aged 50-59 is $10,000

Retiring on $10,000 in the next few years isn’t an attractive proposition. But wait, there’s more. The professor reckons that “the old assumption that people would retire debt-free will not hold true for the next generation of retirees.” They have debt too. That means interest as well.

This is the reason that Governments of wealthy nations are worried. We can see this in Australia, where the Government is encouraging mass immigration and encouraging a new baby boom through the ‘baby bonus’.

The Solution?

So what happens if the government raises the retirement age to the point where it’s likely that you’ll die before you can retire? What happens if the purchasing power of your Superannuation (401K) is steadily eaten away by a sluggish economy and rising prices? Assuming you can keep a job, do you just keep working until you die?

Personally, I am not expecting to ever see a cent from the government for my retirement. I’m not even expecting to see any money from my Superannuation. After all, it relies on the economy growing steadily for the next 40 years and I have my doubts about that.

For me, the answer is to become as resilient and self-sufficient as possible. Realigning expectations to this reality, getting out of debt, reducing expenses, finding work that I love and will enjoy doing into my old age. These are all maxims of voluntary simplicity and I hope they will all serve well to deliver a dignified ‘semi-retirement’. The notion that we can all play lawns bowls and jetset around the world during our final years will not last much longer.

To end, I wanted to include some of the comments from the post, The Grey Tsunami over at Down To Earth as I think they amplify my thoughts on this topic.

What are your thoughts?

This is an important message. My husband and I are in our early 30’s, and we understand that here in the US, there will be no social security for us, and that the age of retirement for those who do receive a pension might well be 70. Simple living, with an emphasis on health in terms of meals and lifestyle are going to be the only comfort for us and others like us. ~ The Simple Poppy

This is one big reason why I am so glad I stepped forward into this life while I am young. This issue actually makes my DH angry, because he has believed for a long time that we will not get this money back. And here in Canada, it’s a lot of money. My goal is to have an entirely self-sufficient home, where we can live without electricity, gas, even plumbing if need be, and that it be modern and beautiful at the same time. My DH is making me a solar oven and a cob oven so that we will have two alternatives from the modern oven. Things in my home are getting slowly replaced- the essentials, so that if we don’t have money for them, we aren’t in the bind. We aren’t counting on a pension, we never were. We are preparing. I’m glad you raised this issue though- we need to all know we cannot rely on the government to take care of us, and take steps now. ~ The Girl in the Pink Dress

I’m 43, and hubby is 46. I was told by my financial planner not to count on any social security or state pension being available when it came time to retire. It was all up to me. So, we have a house with no mortgage, have no debts, and are saving, saving, saving and becoming self sufficient as much as possible. The government coffers are bare, and it is up to us to fill them ourselves if we don’t want to be working until we drop. ~ AM of the bread

The objectives of the welfare state were undoubtedly noble and humanitarian, but the results have been disastrous. As harsh as it may sound, I think it would have been better if entitlements like the aged pension had never been enacted in the first place. And I didn’t need the benefit of hindsight to help me arrive at this conclusion. Instead of incentivising self-reliance, hard work and financial responsibility, what we have now is a system which actively encourages dependency and tells us that becoming a ward of the state is something to which we should all aspire. Anyone listening to talk-radio in the lead-up to the recent federal election (in Australia) would have heard what this does to a person’s moral compass. Instead of expressing concern for the country as a whole and acknowledging that profligate spending is unsustainable and destabilising (see Greece), most callers were only interested in what was in it for them personally…and to hell with where this leaves their grandchildren and all future generations. Obviously the current system cannot be abolished overnight and the transition from welfare dependency to self-reliance needs to be fair and just, but the fabric of our society will be made all the stronger once the aged pension is all but eliminated (some kind of safety net will no doubt still be available). ~ Simone

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4 comments

  1. Great post, Mia. Our retirement plans are alot different to most that I know (well, those that even have any!) but they are the same goals we have now… learn skills, acquire tools & equipment, get healthy, become self sufficient-ish, build community & resilience, and not rely on the government. But we also want to be in a position to live with my family & my kids families, to help each other out.

  2. My wife just “retired” in Australia, cashing in her $30,000 superannuation….

    We are spending the whole lot on preparations for the new world order, coming in a town near you!

    We’re buying extra solar panels to somewhat guarantee ourselves some income by selling power to the grid, we’re finishing the house (a new flue for the wood stove, weather proofing where unfinished, a new shed to store all the stuff in the house) and a new set of batteries to bide us through what I think will be worsening blackouts.. A new chook shed is also underway….. and a dam to secure water for the “farm”.

    The trick with the future, in my opinion, is to prepare so that one does NOT need money, by being as self sufficient as possible beyond the economic collapse and Peak Oil.

  3. The biggest part of this problem is the idea that there is some monetarily fixed way of living that includes some amount of what a person lived as a productive family unity. In other words, the pension costs and the needs of retirees don’t necessarily have anything to do with each other. Note that I said “costs”, not accumulation or intents. The separation of families into more and more individual units has destroyed the continuity of common knowledge and care, while also generated huge increases in costs of living, which are encouraged by profits. I have never had a belief that I would receive any of the money I put into ‘Social Security’. Like my father, I expect to work until I die, taking what I get, but not taking it for granted. The relocalization efforts of the permaculture/transition communities are the best we can work with. No solution to a profit-based problem will come from a non-profit direction “up high”. We have established in our society that profits take precedence over people and the environment, and until profit-based thinking collapses, it isn’t profitable to teach people to make less profit. Humans have over-adapted to an artificial environment which they created to avoid any moderating influences like predators and diseases. Until humans are forced out of the artificial reality, they won’t be able to think or act naturally and reasonably.

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