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Is The Idea of Retirement A Silly Western Fantasy?

 
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Old 08-12-2008, 02:16 PM   #1
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Is The Idea of Retirement A Silly Western Fantasy?

Whilst Dr. Phil is far from a reliable source of economic information, however he was interviewing Ben Stein, a top US economist, when Stein mentioned an interesting point that to date I haven't heard much discussion on, he said something to the effect of"

"The dream of retirement will go down as a passing fantasy of western societies."

I can't help but feel that this remark is becoming increasingly likely given the economic requirements of funding the aging population that is living longer and costing more to keep healthy.

In my thread - The US Going Bankrupt - I highlighted the difficulty economies like the US would have in sustaining an elderly population and I can't help but feel that the time where the majority of individuals will be required to work until they are 70 or even 75 is fast approaching. I can vividly see a future where "retirement" prior to the age of 70 is reserved only for the social elite and being "retired" will be a word used to describe those that are physical unable to work anymore.

So is the idea of retirement just a silly western fantasy?
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Old 08-12-2008, 03:16 PM   #2
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Don't forget that living for "decades" in retirement is a relatively recent phenomenon resulting from the vastly improved medical care available now allowing people to live well into their 80's.

Even just in the past 25 years, life expectancy for males has increased by 5 years!

4102.0 - Australian Social Trends, 2006

Previous retirement planning was based around the concept of pensions, while the more recent move during the past 25 years to employer funded superannuation schemes has dramatically changed retirement planning.

On of the biggest problems facing retirees is the potential that they could outlive their superannuation savings. As life expectancy increases (and according to the ABS, women are projected to have a life expenctancy approaching 90 within the next 50 years - 4102.0 - Australian Social Trends, 2006 ) ... this problem is magnified.

Some more articles about increasing the "retirement age":

Dawning of a new retirement age - Opinion - smh.com.au

Quote:
Did you know the pension age for men has been unchanged at 65 since the pension was introduced in 1909? In those days that was very old - most people didn't live long enough to collect it. And those who did didn't get it for long before they popped off.

Life expectancy has increased considerably since then, of course. It's risen by more than 45 per cent since the 1960s - mainly because of the decline in the number of deaths from heart disease. By 2001, a 65-year-old woman could expect to live another 21 years and a 65-year-old man almost another 18 years.

...

Today the private sector Committee for Economic Development of Australia will issue a report by Dr David Knox, perhaps the nation's leading actuary, proposing that the pension age be raised gradually to 67 and then raised regularly in line with rising longevity.

While the proposal for a "dynamic" pension age is novel, many other countries are heading down this track. Iceland and Norway have already lifted their retirement age to 67. Other countries - including the United States, Britain, Germany and Denmark - are in the process of moving to 67 or 68.
Now is the time to raise the retirement age - www.theage.com.au
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This is a general comment only and does not constitute advice. Before making financial decisions you should seek advice from a professional adviser, who can take into account your specific circumstances and investment goals.
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Old 09-12-2008, 01:42 PM   #3
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Those articles were quite enjoyable reads and the impression I got from both of them is that the pension age of 65 needs to begin to be gradually lifted to reflect the aging population. I'd even argue that the age at which individuals have access to super should be gradually increased as well.

Not that it was mentioned in the articles but there may even be a strong case to argue for the lifting of the GST rate as more as more baby boomers retire and stop paying income tax, though I'd hate to be the politician that was proposing the policy, but ensuring the retired are still contributing to government revenues in the form of GST payments will be vital in enabling government to fund retirees in addition to stimulating a growing economy.

I think it is especially important to start making these changes now rather than in 5, 10 or 15 years time when the elderly are a much more significant percentage of the voting population. Otherwise they may very well block policy that is in the long term national interest due to their own vested interests.

...ahhh the shortcomings of democracy...

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Old 10-12-2008, 11:23 AM   #4
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Originally Posted by Chris C View Post
I'd even argue that the age at which individuals have access to super should be gradually increased as well.
This is an issue I have thought about for some time and is the major factor as to why I have set a family trust at the start of the 2007/8 tax year into which I invest most of my funds. By keeping these funds outside of super my early retirement plans are less likely to be affected if the law is significantly changed (against me) over the next 28 years until I can access my super.
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Old 10-12-2008, 11:48 AM   #5
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Hi Sacko,

Over time superannuation laws become less restrictive. With a massive aging population, any government to change the laws and become more restrictive would be committing policitical suicide with Australian retirees.

The age which people can access their superannuation is increasing under preservation rules. I am a 29 year old, by the time I can access funds in superannuation I will be aged 60 due to the preservation age increasing. Chris C can rest assured as it is increasing.

The choice to put funds into superannuation does really take into accountant your timeframe to use the funds. If your specifically setting aside funds for retirement planning then superannuation is usually best. Family trusts are usually set up to distribute income to family on a lower tax rate and potentially also for asset protection. Obviously if you want to use the funds before reaching your preservation age (between 55 and 60) you wouldn't want to lock it up in superannuation.

Saying that, if you want to NEVER pay Capital Gains Tax, a superannuation fund which does in-specie transfer to the Pension phase is great. Just make sure they transer the assets and NOT sell down the assets!

Cheers,

Dan

PS Before making an investment decision speak to your FPA registered Financial Planner.
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Old 10-12-2008, 12:00 PM   #6
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Originally Posted by Sacko View Post
This is an issue I have thought about for some time and is the major factor as to why I have set a family trust at the start of the 2007/8 tax year into which I invest most of my funds. By keeping these funds outside of super my early retirement plans are less likely to be affected if the law is significantly changed (against me) over the next 28 years until I can access my super.
Seems like a smart option to me, but this is the sort of foresight and action that would probably push you into the category of "social elite" where early retirement is still a realistic option, unlike the majority of the population who seem to be blissfully unaware that too many freeloaders straining an economy results in dire consequences and as a result the government will eventually be forced to reform the system.

For me the big question is which government has the balls to go against the increasing size of the elderly vote to bring about the reforms.
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