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Blog Post: Raising the Age of Retirement

By Emily Morris - 15 April 2014 68

I should be up front. I’m one of those people (I imagine and hope we are very few) who spent their twenties and early thirties traveling the world, clocking up a solid log of fabulous experiences; sadly failing to accumulate any superannuation worth bragging about. So for me, I kind of know I’m going to be working, or attempting to work for as long as my bones will hold me up.

My father on the other hand has worked hard for more than 55 years now and at 73 is being forced into retirement, as jobs are hard to come by. All around who love and cherish him tell him he’s earned a break, along with the fairly measly pension that goes with it. But, he wants to keep working because he feels he can, even though he can essentially afford to retire.

With this in mind, I can’t help but wonder how raising the retirement age would actually work. What would it look like? In Singapore, where government supported retirement is nonexistent, there are a plethora of jobs seemingly created for the older generation. Not too physically demanding but enough to keep a small income coming in (in a country where the cost of living is on the increase this hardly covers basic needs, but the idea and infrastructure is there). Yet here we are automating as much as possible. When was the last time anyone saw a tea lady come around the office? Or, a janitor permanently on site to take care of things like spills and basic repair?

I heard something on the radio today about women in their 60s becoming an increasing population within the homeless. Mostly women who have lead their lives traditionally, taking care of a family, raising children, playing by the ‘rules’ – only to be left potentially with a broken marriage, no super and in many cases it would seem, no home. How do we expect these women to work until they’re 70 when they can’t find work in their 60s?

When was the last time your workplace employed someone new to the company who was over 60, or even 55?

To me, this is simply a shift away from paying a pension, toward potentially paying the dole. For people who have worked all their lives, played by the rules and contributed to the economy with taxes and required consumer behaviours, is that really a way for them to end their working lives? Would that merely add a bill for the mental anxiety and depression that would be likely to follow?

This is a cultural change and one that would need incentives for businesses to employ more experienced employees at times when they would traditionally be winding down their working patterns.

It may be a way of the future, but how much would need to change to make it viable? And how do we get onto it? I need to be working for a long time!

What’s Your opinion?


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68 Responses to
Blog Post: Raising the Age of Retirement
1
bd84 9:09 am
15 Apr 14
#

You’re actually talking about the pension age, not the retirement age. You can retire whenever you want to, depending on your financial situation to live comfortably.

The pension was established back in the early 1900s when the life expectancy age was about 65 and never took into account the population spike from baby boomers when introduced, so it is an expensive and inefficient scheme.

The talk about raising the age to 70 is built on hype. It will be 3 years more than the age of 67 which will begin to increase from 2017 to 2023 introduced by the Labor government. Any increase to 70 would likely be seen from about 2025.

People haven’t yet cottoned on to the fact that one day, there will be no aged pension. Superannuation was established for self funding retirement and reduce people’s dependency on the government pension. Raising the pension age won’t have a significant impact on those that have been contributing well to their super.

The main issue for the increased pension age is that the superannuation system needs to be reformed to allow people to contribute more pretax dollars to their super without being taxed to the extreme after $25k. If people can accelerate their self payments, then for most people the pension age will be irrelevant. For those who can’t afford it and cannot continue working, there will always be some other form of government financial support.

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2
neanderthalsis 10:21 am
15 Apr 14
#

The Aged Pension was originally established in 1909 and set at age 65, which was then three years older than the average life expectancy. Roll forward 105 years and there is a very real prospect that most of us will live into our 90’s, potentially spending 30 odd years on the government teat is we leave the workforce at 65.

The former Labor government introduced a creep of the aged pension age to 67 by 2029, by which time pretty much all baby boomers will be out of the workforce and will have blown their superannuation on a flash new caravan and by living free and easy at taxpayer expense.

As BD84 stated, the change is to the Aged Pension age, not the retirement age. You can retire whenever you want provided you can support yourself. This is why I, at the ripe old age of 35, am putting extra into my super.

As for age suitable jobs, the labour market has seen a structural shift from manufacturing/manual work to predominantly service work. I don’t think any one would expect someone to be laying bricks into their 70’s but serving behind a counter is more than achievable for most.

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3
VYBerlinaV8_is_back 11:39 am
15 Apr 14
#

At some point the government needed to do this, and there will be more to come. Watch for changes in the next few years to superannuation rules to prevent access prior to age 70 also.

As a country, we simply can’t afford to pay this much welfare. Especially given the tax breaks that are given to superannuation.

I have been planning for early retirement since my mid twenties. I would encourage others to start planning (or ramp up ) at whatever age they are. In 30 years time, there may not be a pension at all.

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4
dungfungus 1:41 pm
15 Apr 14
#

You have answered your own question in the first paragraph.
Providing sufficient capital for one’s retirement is a choice. Sacrifices have to be made.
Most people I know who have become unemployed at an age over 50 are either still unemployed or they have become self-employed. Your assessment of the absence of 55 year olds and over in the workplace (other than self-employed) is spot on.
Post #1 has already sussed out what is going to happen and while correctly pointing out that the annual maximum concessional contibution limit is only $25k, a combination of employer funded contributions and self-contribution (another sacrifice) up to the limit is still the best way to accumulate sufficient capital to live with dignity in retirement without any assistance from the government.

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5
dungfungus 2:05 pm
15 Apr 14
#

neanderthalsis said :

The Aged Pension was originally established in 1909 and set at age 65, which was then three years older than the average life expectancy. Roll forward 105 years and there is a very real prospect that most of us will live into our 90’s, potentially spending 30 odd years on the government teat is we leave the workforce at 65.

The former Labor government introduced a creep of the aged pension age to 67 by 2029, by which time pretty much all baby boomers will be out of the workforce and will have blown their superannuation on a flash new caravan and by living free and easy at taxpayer expense.

As BD84 stated, the change is to the Aged Pension age, not the retirement age. You can retire whenever you want provided you can support yourself. This is why I, at the ripe old age of 35, am putting extra into my super.

As for age suitable jobs, the labour market has seen a structural shift from manufacturing/manual work to predominantly service work. I don’t think any one would expect someone to be laying bricks into their 70’s but serving behind a counter is more than achievable for most.

It is simply not true to suggest most baby-boomers will “blow” their superannuation and then live on the pension. Most baby-boomers are thrifty when compared to the demographic groups following them.
Nor is it correct to repeat the socialist inspired mantra that self-funded retirees have excessive tax breaks. Remember, most self-funded retirees contibuted their own superannuation money and paid contibutions tax on it so why should they be taxed twice? Also, self employed people running their businesses outside a corporate structure were discriminated against when it came to the maximum concessional contributions allowed.

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6
VYBerlinaV8_is_back 2:35 pm
15 Apr 14
#

dungfungus said :

neanderthalsis said :

The Aged Pension was originally established in 1909 and set at age 65, which was then three years older than the average life expectancy. Roll forward 105 years and there is a very real prospect that most of us will live into our 90’s, potentially spending 30 odd years on the government teat is we leave the workforce at 65.

The former Labor government introduced a creep of the aged pension age to 67 by 2029, by which time pretty much all baby boomers will be out of the workforce and will have blown their superannuation on a flash new caravan and by living free and easy at taxpayer expense.

As BD84 stated, the change is to the Aged Pension age, not the retirement age. You can retire whenever you want provided you can support yourself. This is why I, at the ripe old age of 35, am putting extra into my super.

As for age suitable jobs, the labour market has seen a structural shift from manufacturing/manual work to predominantly service work. I don’t think any one would expect someone to be laying bricks into their 70’s but serving behind a counter is more than achievable for most.

It is simply not true to suggest most baby-boomers will “blow” their superannuation and then live on the pension. Most baby-boomers are thrifty when compared to the demographic groups following them.
Nor is it correct to repeat the socialist inspired mantra that self-funded retirees have excessive tax breaks. Remember, most self-funded retirees contibuted their own superannuation money and paid contibutions tax on it so why should they be taxed twice? Also, self employed people running their businesses outside a corporate structure were discriminated against when it came to the maximum concessional contributions allowed.

I agree. This myth that the baby boomers are somehow more financially profligate than Gen X or Y is ridiculous.

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7
bigred 5:59 pm
15 Apr 14
#

“aged pension”? What law is that paid under because I cannot find it?

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8
milkman 6:17 pm
15 Apr 14
#

VYBerlinaV8_is_back said :

dungfungus said :

neanderthalsis said :

The Aged Pension was originally established in 1909 and set at age 65, which was then three years older than the average life expectancy. Roll forward 105 years and there is a very real prospect that most of us will live into our 90’s, potentially spending 30 odd years on the government teat is we leave the workforce at 65.

The former Labor government introduced a creep of the aged pension age to 67 by 2029, by which time pretty much all baby boomers will be out of the workforce and will have blown their superannuation on a flash new caravan and by living free and easy at taxpayer expense.

As BD84 stated, the change is to the Aged Pension age, not the retirement age. You can retire whenever you want provided you can support yourself. This is why I, at the ripe old age of 35, am putting extra into my super.

As for age suitable jobs, the labour market has seen a structural shift from manufacturing/manual work to predominantly service work. I don’t think any one would expect someone to be laying bricks into their 70’s but serving behind a counter is more than achievable for most.

It is simply not true to suggest most baby-boomers will “blow” their superannuation and then live on the pension. Most baby-boomers are thrifty when compared to the demographic groups following them.
Nor is it correct to repeat the socialist inspired mantra that self-funded retirees have excessive tax breaks. Remember, most self-funded retirees contibuted their own superannuation money and paid contibutions tax on it so why should they be taxed twice? Also, self employed people running their businesses outside a corporate structure were discriminated against when it came to the maximum concessional contributions allowed.

I agree. This myth that the baby boomers are somehow more financially profligate than Gen X or Y is ridiculous.

+1.

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9
JustThinking 6:24 pm
15 Apr 14
#

Hiya,
You say “But, he wants to keep working because he feels he can, even though he can essentially afford to retire.”

So the money or pension etc isn’t the issue, it’s just he wants to keep working.
Can’t he volunteer somewhere?
Most places are screaming for volunteers.

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10
mmillercfp 6:29 pm
15 Apr 14
#

bigred said :

“aged pension”? What law is that paid under because I cannot find it?

The age pension is paid under the Social Security Act 1991 which you can find at http://www.austlii.edu.au/au/legis/cth/consol_act/ssa1991186/index.html – it’s a joy to read!

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11
morethanmumma 7:15 pm
15 Apr 14
#

I fully accept that there is unlikely to be a pension by the time I retire. And I agree that baby boomers are generally a far more frugal generation to my x-ers (my parents certainly wouldn’t have jetted off around the world without feeling financially stable first…). I guess my concern is primarily around the community and cultural adaption to the laws. My dad (and many of his generation) completely links a great deal of himself and his self worth to contribution through work. I just wonder how a raised pension (to his mind, retirement) age would further impact his struggle to feel valuable in older age. I worry that more people feeling like they have to work (and for those without suitable super who do need to work) will be faced with nobody willing to employ them.

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12
JustThinking 7:46 pm
15 Apr 14
#

morethanmumma said :

I fully accept that there is unlikely to be a pension by the time I retire. And I agree that baby boomers are generally a far more frugal generation to my x-ers (my parents certainly wouldn’t have jetted off around the world without feeling financially stable first…). I guess my concern is primarily around the community and cultural adaption to the laws. My dad (and many of his generation) completely links a great deal of himself and his self worth to contribution through work. I just wonder how a raised pension (to his mind, retirement) age would further impact his struggle to feel valuable in older age. I worry that more people feeling like they have to work (and for those without suitable super who do need to work) will be faced with nobody willing to employ them.

What is wrong with helping others?
If someone needs to feel valuable, then helping less fortunate is certainly one way to do it.
There are plenty of other people out there that have it worst off that could use a hand.

If money is an issue… then there are many options.

Times might get tough but they get tough for everyone, not just retirement aged people.

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13
banco 8:02 pm
15 Apr 14
#

dungfungus said :

neanderthalsis said :

The Aged Pension was originally established in 1909 and set at age 65, which was then three years older than the average life expectancy. Roll forward 105 years and there is a very real prospect that most of us will live into our 90’s, potentially spending 30 odd years on the government teat is we leave the workforce at 65.

The former Labor government introduced a creep of the aged pension age to 67 by 2029, by which time pretty much all baby boomers will be out of the workforce and will have blown their superannuation on a flash new caravan and by living free and easy at taxpayer expense.

Nor is it correct to repeat the socialist inspired mantra that self-funded retirees have excessive tax breaks. Remember, most self-funded retirees contibuted their own superannuation money and paid contibutions tax on it so why should they be taxed twice?

Because they should chip in to pay for the millions of their fellow baby boomers who aren’t going to be self funded or do you think the young should pay for them?

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14
dungfungus 8:25 pm
15 Apr 14
#

The sleeper that everyone has forgotten about is a change in legislation of funds controlled by APRA which will abolish lump sum payouts and “convert” fund balances to allocated pensions.
Unless this happens there is a probability that, in the event of a financial crisis requiring contributors to access their funds, the funds will not have the “on call” liquidity to meet demands. Large funds are now investing more long term in infrastrcture which makes it impossible for them to sell these assets quickly and the only entity that will be able to buy them is another large super fund. A “run” on some of these funds could render them insolvent and who knows where that would lead. It may give a government of the day an excuse to nationalise all super funds. Don’t dismiss this possibility; it has already happened in Argentina and Hungary.

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15
bigred 9:10 pm
15 Apr 14
#

mmillercfp said :

bigred said :

“aged pension”? What law is that paid under because I cannot find it?

The age pension is paid under the Social Security Act 1991 which you can find at http://www.austlii.edu.au/au/legis/cth/consol_act/ssa1991186/index.html – it’s a joy to read!

Glad you cleared that up. Now drop the “d” folks!

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