The topic of retirement starts to loom large when the number of work years starts to grow slim. For many the thought of retirement is only just a dream, for the simple reason that we are constantly bombarded with negativity in the media about how retirement is something only previous generations could look forward to.
It is true, with Australia’s aging population set to soar with the baby boomer generation now moving into that space, the burden placed on the social system, the pension, is truly going to come under an impossible strain. The baby boomer generation is the period of 1946 to 1964, gathering it’s title from the post World War Two period of a population explosion experienced around the globe. As this demographic move into the retirement phase of life and the number of income producing folk begin to decline, the strain placed on the public purse is going to increase exponentially.
The labour force participation rate is being artificially stimulated, to keep people working longer than they would have expected, in order to keep propping up the coffers and straining more blood from a stone, on people who are not able to be financially independent and retire comfortably. The federal government is slowly increasing the minimum retirement age to 70 years of age. The time to retire and collect the public pension is like a mirage that will be forever moving further and further down the road to become something of an impossible dream.
One article about the hard working middle class on the The Age, focuses on the plight of many who are not prepared for the financial demands placed on the elderly once the money source has dried up.
A recent TVC produced by a financial services company highlighted this fact and fear, with a futuristic setting inside a museum. The scene depicts a young boy looking through the glass of the museum display, watching a carefree elderly couple driving a red sports car with wind in their hair and not a care in the world. With this young boy is a man in a business suit, grey haired and looking rather sad. As the boy looks up and asks, “What are they doing granpa?” the sad old gentleman, aged about 75 years old, replies, “They are in retirement. Something people used to do when I was a boy”. The youngst replies, “What do they do in retirement?” – “Whatever they wanted” replies the sad old gent.
The point is made very clearly and for those approaching this time in life, it is frightening indeed.
To think that you will not be able to stop working, (that is assuming you will still have a job or be able to get some sort of work) is a very dim prospect for those in such a position. You have worked hard all your life, put your kids through school, paid off the house and have put aside what little superannuation you could afford, and yet you are faced with an ever lengthening of time to rest and relax with the hardship of working for a living. Just how many Australian’s are in this position is a very good question.
In a recent survey published in the Sydney Morning Herald, “Hard Times For Baby Boomers“, only half of the over 50’s surveyed were looking forward to retirement. When you note the statistics, that 25% had less than $500k in retirement funding, plus a further 12% with having between $50k and $100k in super, you can see why.
So if you are in the predicament of having too little super set aside, and let’s face it not many of the Baby Boomers have been covered by the compulsory superannuation contributions of later generations, the only option is going to be the government pension. With such a strain on the public purse, the money is going to run out and then what?
With the right financial planning even with a small amount in super, given a short amount of time, for example around 7 years, someone with $300k to invest in the US real estate market, could amass a property portfolio, fully paid off and valued at around $2 million dollars. With property management fees and taxes taken out, an individual or couple would be left with around $9k per month to live on. The way this is done, is by sourcing the right properties in the best locations that offer a positive yield (cash flow positive), as against cash flow negative, that essentially pay themselves off over the approximate seven year period.
Trying to find cash flow positive investment properties in Australia right now, with the current overheated property market, is like trying to find hens teeth. Sydney and Melbourne, are at an all time high and investing in these areas is not going to produce the cash flow positive yield that a soon to retire Baby Boomer might be looking for. If you are nowhere near retirement and these two cities are your prime target right now, then you may wish to visit this site for more information.
If any of this is touching a nerve then, now is the time to act. Relying on the public purse may make you feel like the dog who hungry for a bone, relied on the old lady who found the cupboard bare.