If you are a success at the business of living you will live long enough to retire, live out your days with fun and laughter. The ads we see only show happy older people exercising fabulous options, travelling, sporting, spending and basking in the glow of their extended families. Expensive stuff.
Retirement is an accidental by product of the demand for younger, stronger workers to man factory production lines in the early 20th century– a little pension eased the pain of being laid off for the aged worker. Otto von Bismarck created an old age pension in 1889 but he set the qualifying age at 65 and few lived to collect.
Today retirement years can go on for a long time. NZ life expectancy for men will be 84 years and for women 87 years by 2031 – a very long time to live and getting longer. A recent Lancet article indicates that 50% of 21st century babies born in the affluent west will reach 100 years of age. Living for 35 years in hardship is no bonus, planning and providing your choices for that time is essential.
NZ aged folk are heavily dependant on Super, the numbers are alarming, 70% of 65-84 year olds exist on a pre tax income of between $ 10-30,000 and 50% a pre tax income of $20,000 or less. (2001 statistics – little has been available since)
Half the men aged 65+ had assets worth less than $31,200, half the women less than $24,000 (not including their homes) and a full third had no assets beyond their family home.
From 2011, a full 12% of our population known as the baby boomers will be eligible to collect Super and more will come on each year, and there will be a diminishing proportion of the population working to support them. Not a recipe for old age happiness and contentment I think…
Super will become less affordable over time and Governments will react by increasing the qualifying age, failing to increase the amount receivable and possibly means testing. The United Kingdom govt. is looking to increase the age to 68 and then to 70 by 2044, the Aussies to 67 by 2017, watch for those changes to be brought forward in NZ.
Retirement as a distant concept is quite appealing, a time to enjoy the fruits of your labours, but it presupposes you have quite a lot of fruit to enjoy. A 20-30 year stretch eking out an existence on Super is not a good prospect and I think the existence will become harder with time.
American author Gail Sheehy writes,” Look at all the time left. Today there is not only life after youth, but life after empty nest. There is life after layoff and early retirement. There is life after menopause. There is life after widowhood. There is life after coronary. There is likely to be life after cancer. Another life to find a dream for, to plan for, to train for, to invest in, to anticipate now.”
Implementing a plan to create an asset to augment income in your old days is never easy, always a bit of a shock. A bit like diving into a swimming pool – cold at first, but once you get accustomed to it, the water’s fine.
It’s truly never too late to begin, to make a start on creating some extra capital for the days ahead. It will be no surprise to you to discover that real estate is an absolutely excellent component of a capital building program and that there are guides available to you, guides with experience and with portfolios of their own; experienced in the ups and downs of the property market.
When you do design your plan, be sure to include Real Estate investment amongst your options, done correctly it will be the source of long term comfort and a more enjoyable future.
There are a few uncertainties at present around the ongoing treatment of residential investment regarding taxation; these will be addressed by the end of the month. Life will go on and investors will return, the option is too good to miss and too sure to be successful long term for the sector to become marginalised.
(Inspired by Lindsey Dawson, Alive magazine, issue 5)