Life expectancy for Australians is increasing, according to the Australian Institute of Health and Welfare, with the most recent figures showing that newborn females can expect to live until the ripe old age of 84.6 years (compared to 80.4 years for men). The fact that you will be around for a long time should shape the financial decisions you take. Ideally, you want to enjoy all the things you do right now – including fashion, leisure, travel, and of course, health – but you need to follow a sound financial strategy even from the time you start working.
FIRE vs Later Retirement
The FIRE (Financial Independence, Retire Early) promises the fulfilment of what must surely be a fantasy for young and older employees alike: the chance to enjoy freedom, travel the world, and not be a ‘slave’ to established routines and long working hours. If the ideals behind the FIRE movement appeal to you, take note that this movement advocates for the importance of saving/sacrificing now, to enjoy the good life later. This brings up many philosophical questions. Many anti-FIRE proponents argue, for instance, that there is no guarantee that anyone will make it into old age. Therefore, it is important to enjoy life – and money – in the present moment as well. Trends in Australia show that employees are retiring later rather than earlier. This is the case for both men and women. As noted by the Australian Bureau of Statistics (referring to 2016-2017), workers were planning on staying in the labour force until 65. That’s two years more than the previous decade.
What are Australian Women Choosing?
Government statistics show that around 46% of Australian women had retired by age 55 in 2016-2017, compared to only 25% of men of the same age. Most opted to stop working because they became eligible for superannuation or a government pension. Interestingly, the age pension is the main source of income for 45% of retired women. To live exclusively off a pension, you need to adapt to a very tight budget indeed. A recent report by the Grattan Institute shows that women retiring who are renting homes in Sydney or Melbourne won’t likely have enough savings to live comfortably. Part of your financial plan could therefore take into account later retirement. This will enable you to live more comfortably now and later, when additional savings and investments will be a more than welcome supplement to your pension or superannuation.
Do You Have the Right Insurance?
You never know when you could have a health condition that could affect your income so if you can afford it, income protection is key. Note that in Australia, women pay 50% more than men for the same income insurance policy, for reasons such as potential pregnancy and birth problems, the earlier age at which female cancers strike, and the higher likelihood women have of battling musculoskeletal problems. If you work in a high-risk job and wish to take out an income protection policy, try saving on other insurance policies by selecting private health insurance companies that give you discounts for being under 30. Some women are switching to Qantas health insurance, for instance, because they can enjoy a 10% discount plus a 2% drop every year after they turn 41.
Making the Right Investments
In addition to your superannuation, investments are key when it comes to living well upon retirement. Research shows that women are better investors than men, since they take more time to research different options and know how to match investments to their goals. A good financial advisor is the first good investment you can make. Talk to them about your goals, set timelines for delivery, and consider mid-risk investments that will provide an interesting enough return to merit borrowing amounts from your savings nest.
Track Your Expenses
Make use of apps like TrackMySPEND, Pocketbook, or MoneyBrilliant to work out what expenses you can and should be avoiding. Little treats such as an afternoon gourmet coffee or coffee shop snacks can add hundreds of dollars to your expenses every month. Seeing it all laid out in figures and percentages can be a wake-up call to the importance of planning routines like shopping, lunchbox preparation, and even investing in a top coffee device that will make you cracking coffee at work at a fraction of the price.
Planning for your future is a complex task that very much depends on your life goals and values. Retiring early is a dream for many, but you need to be prepared to save for the future. If you wish to enjoy the moment, you can still build a healthy nest by looking to save in other ways. By selecting reasonably priced insurance, covering yourself against income loss, and making a few key investments, you can rest assured that you will be more independent than ever in your senior years.