L.P. Hartley is reputed to have said that “retirement is another country” in his first draft of The Go-Between. Over the years retirement has changed and means many things to different people.
Over the last 100 years there have been about five different ways to retire from a financial perspective.
The Government provided aged pension first appeared in Australia just over 100 years ago and was only available for those who had lived much longer than the average life expectancy. Alongside the aged pension came superannuation for public sector and some private sector employee. Retirement was perhaps seen as having one foot already in the grave.
From the 1960s life expectancies for those over the age of 60 began to rapidly improve. Retirees were fitter and healthier than their parents at an equivalent age but had little opportunity to contribute to society. Keith Weber, a US based trainer and consultant to financial advisers has said that, “Social attitudes and age discrimination left many retirees of this era relegated to the sidelines with little to do but pass the time.”
Retirement was seen as a 20 to 30 year holiday. Early retirement became a sign of career and financial success and was the golden years where your only objective was to enjoy the luxuries and benefits of a lifetime of hard work.
The advent of this retirement type in the 1980s has been reflected in many fund manager marketing campaigns for several decades. It’s still being used.
There are three phases to this type of retirement.
Phase One is the early years of retirement when you travel and do all the things that you wanted to do. Phase Two sees a decline in the thrill of visiting exotic locations and a desire to spend time with family and friends. Phase 3 sees the decline in mental capacity and the rise in physical ailments and the need for assisted living.
This appeared in early part of this millenium. Sixty years of age became the new 50. Retirees stopped their primary careers with “more gas in the tank and a strong desire to give back and continue to contribute in a personally meaningful way”, says Weber. They were looking for a new opportunity and retirement became a chance to follow passions and finally do what you had always wanted to do.
The Global Financial Crisis blew away the financial ability for people to pursue some new prospects. Many people in their late 50s to mid 60s have realised that retirement dreams demand a lot more money.
Weber says that, “The desire to give back and pursue a personal purpose has not lessened however, leading many people to rethink the retirement goal. Rather than spend 10-20 more years in jobs they’ve grown tired of, many Baby Boomers and even Gen X’ers are re-tooling, re-training and reinventing themselves to enter careers they truly enjoy with the idea of working those careers well past ‘normal’ retirement age.”
It’s my guess that most retirees in Australia will be somewhere in several versions of Retirement Types 3 to 5.
It might be useful for retirees and those close to retirement to think about their post working life. A key component is being financially prepared.
A good way for ADF members to be prepared is to understand their entitlements under the military superannuation schemes, DFRDB and MilitarySuper (also known as MSBS). For more information, visit the website of your military superannuation scheme, www.dfrdb.gov.au or www.militarysuper.gov.au.
The best way to be ready financially for retirement is to understand your superannuation entitlements, save and invest. Some people will be able to achieve their retirement goals by themselves but most people need guidance on how to navigate through the financial market and regulatory minefields.
Before seeking advice you should watch our video, Financial Advisers – The Facts and the Fiction online or available as a free DVD copy by clicking here.
ADF Financial Services Consumer Centre