Australia’s demographic landscape is changing. The 2021 Intergenerational Report outlines some sobering projections for the next 40 years in Australia, and the world may not be your oyster when it’s time to retire.

For young professionals the need for a self-funded retirement and a plan for securing your financial future has never been more important.

The Intergenerational Report released by Treasury projects an outlook for the Australian economy and the impact of demographic, technological and other trends.

Key projections outlined in the 2021 Intergenerational Report include. [1]

Life expectancy rates are continuing to increase
The number of people over 65 years of age is predicted to double in the next 40 years
The ratio of working-age vs non-working age people is decreasing. In 2019-20 there were 4 working age people for every person over 65. In the next 40 years this is predicted to decrease to 2.7 working-age people for every person over 65
Australia’s COVID-19 response and slower population growth is also predicted to affect the Australian economy.

An ageing population and changing health trends places pressure on government spending on health, aged care and the pension which may mean fewer resources available to allocate in the future.

What does retirement look like for you?

Many young professionals haven’t put much thought to retirement, and the first step is to consider how much you will need to fund the retirement lifestyle of your choice. The answer will determine the strategies you’ll need to establish now that will help achieve your retirement goals.

Sounds simple in theory, but building your super, investments and income streams for beyond employment income takes time and concerted effort. The earlier you start, the better.

In simplistic terms, a retirement income of $60,000 per annum would require investment capital of $1,000,000, based on a 6% return. The average rate of return for Australian shares over the last 10 years was approximately 6.5% per annum, and 6.3% for property. [2]

When planning for the retirement lifestyle of your choice, you need to consider the longevity of your savings too, as your retirement could last 20 years or more.

Start now

Don’t put off planning for your future, the sooner you start the better. Simple steps taken now can have enormous benefits for your future and these might include:

Cashflow management: Effective cashflow management is a financial fundamental for young professionals. We can help you identify strategies to improve your cashflow in the short-term and review your expenses and earnings to investigate essential and non-essential expenses, with the aim of using excess cash to start or boost your investment strategy.

Debt management: There are many debt strategies that can make a significant difference to your financial health including prioritising debts according to interest payable. There may also be opportunities to repay your home loan faster and recycle your debt to build your wealth through investing. Strategies to achieve tax efficiencies and more tax-effective ways to structure your debt in collaboration with other financial professionals may also be possible.

Boosting your super: Take advantage of the many opportunities you have to boost your super. Implement a salary sacrifice strategy and make the most of your concessional (pre-tax) contribution cap of $27,500 per annum. You can also use carry-forward contributions, enabling you to catch-up unused annual concessional contribution limits for up to five years (starting from the 2018-19 financial year for people with a super balance less than $500,000 as at 30 June of previous year).

Securing your financial future is about establishing good financial habits now that make the most of your circumstances and safeguarding your financial position so you can work towards achieving long term financial security.

In our experience, those who seek financial advice do so because they neither have the time or the knowledge to confidently make the important money decisions that affect their lifestyle now and into the future. For the clients we advise, we encourage them to capitalise on our expertise and experience, which aims to help them avoid unnecessary financial difficulty and implement appropriate strategies for their individual circumstances and long-term goals.

For advice about planning for your financial future and retirement needs, I encourage you to contact our office on 07 3720 1299 or email admin@wealthfundamentals.com.au

Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.

This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions.

This publication cannot be reproduced in any form without the express written consent of the author.

[1] https://treasury.gov.au/publication/2021-intergenerational-report

[2] https://moneysmart.gov.au/how-to-invest/choose-your-investments