As a result of higher life expectancy and lower fertility rates, the population averages are older and the amount of funding required for retirement is increasing.
In Australia, roughly 15 percent of the population were aged 65+, as of 2016. That is around 3.7 million Australians, of which more are also remaining actively involved in the labour force. 18 percent of the UK’s population is over 65 (as of 2016) and in the US, it is 15 percent. However, these numbers are expected to increase more and more as Baby Boomers age and more of the older generations delay retirement because of costs.
Retirement ages for pensions around the world also vary. According to an Aperion Care study, people in the US retire at 66, in Australia at 65 and in Norway at 67.75, amongst the highest retirement ages in the world. On the lower end, Russia’s retirement age is just 57.5, China’s is 56.25 and the United Arab Emirates is the lowest, at 49 for natives, and jumping to 60 for non-UAE nationals.
With aging populations around the globe comes a shift in how we think about retirement. There are some arguments that increased life expectancy and the aging of our populations won’t be stable economically.
There is an older labour force and retirement ages are being delayed. If they aren’t delayed, there is an increased expenditure on retirement and pension packages, with a larger percentage of the population as a whole exiting the workforce, and now being supported by the government. There should be a new system for a changing population and workforce, where the experience and knowledge of the older generations can be used, not retired.
People aren’t saving enough
The Association of Superannuation Funds of Australia (ASFA) published the average super balances at retirement. They found that men saved an average of $292,500 and women saved an average of $138,150.
In the US, families save an average of US$95,776 (AUD$121,494) for retirement. The median rate, however, drops to US$5,000 (AUS$6,343). This shows a significant level of inequality, with the top 10 and 20 percent showing significant retirement savings, and the lower classes having none to very little savings. Currently, many Americans rely on 401(k)-type accounts, paid by their employer from their paycheck, for retirement savings, supplementing their Social Security.
To comfortably retire, individuals and families all need to be saving a lot more than these averages. Some experts say that you need eight times your pre-retirement annual salary to continue without changes to your quality of life. In Australia, it is often assumed that you need $1 million to comfortably retire. In none of these countries is the average enough. Most workers in the US and abroad won’t have enough savings for the now 20 to 30 years following retirement, which has increased because of the higher life expectancy.
Innovate the idea of retirement for the future
There appears to be growing evidence that working for longer, particularly in a job that you enjoy, could be good for retirees’ health and happiness. Delaying retirement can be good for well-being, can help individuals and families to accumulate more wealth before retirement and according to one study, can delay mortality rates among retirees.
Putting these elements together, from the aging population, to not enough being saved for retirement and the benefits of delayed retirement, there is some argument to be had about creating a new idea for retirement in the future. The system we have now is somewhat outdated and most people around the world are unable to afford enough savings to sustain themselves and their families after retirement.