It is safe to say that retirees struggle with their finances and more specifically savings after passing the age of 60. Studies show that most people in Australia have enough money to last about 14 years after they retire. This is not encouraging at all as the average senior citizen outlives their retirement fund by about 5 years.
Now, not to be cynical here, but one’s life shouldn’t be longer than their savings can last. In attempt to solve this issue, a number of financial institutions and banks have thought about introducing various services for financial aid to seniors.
Such a consultant is Mercer and they have started a product called LifetimePlus. This program basically allows customers’ income to grow with their age. This service is also associated with insurance, growth investments and of course – as much flexibility as possible. For instance, a person can leave the system and recover up to 95% of their money in case they do not make it 10 years after retirement.
The problem pretty much has two dimensions according to one of the senior associates at Mercer. First of all Australian retirees simply underestimate how long they will live. This leads to lack of interest in planning ahead. People overlook their future and they shouldn’t. The goal of many banks is to actually promote their products and at the same time convince elder members of our society that it is, in fact, worth planning for your future.
The second part of the problem derives from the lifestyle of the Baby Boomers. Since they have had a relatively good life, they continue to spend a lot even after they retire. Unfortunately such spending habits are barely sustainable and need to be addressed. Even if they do not spend on items and travel that much anymore, they need to obtain medication and pay for aged care. In other words, Baby Boomers are exclusively the ones that need such financial tools the most.
All of this has led banks and think tanks to urge government agencies to rethink and fix the means test for the age pension. First of all, this process needs to be clarified and so that a number of services and products will become available to senior citizens.
Since pensioners live quite conservatively, they are also a little bit unsure about loaning money. They are afraid to fall in debt and this causes some confusion.
One statistic might look a little bit frightening to retirees. It shows that they need about 60-70% of the income they used to have prior to retirement. This alone should be a good enough reason for them to look for solutions to the problem. It needs to be made clear that Australian senior citizens cannot last for a long time relying only on their aged pension.