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Information You won’t get from Unlicensed Accountants #90

Along with a raft of legislative change, the Australian Securities and Investments Commission (ASIC) has also introduced new licensing requirements for accountants who work with and advise Self Managed Superannuation Fund (SMSF) Trustees. Only approx. 10% of accountants have complied with these changes to date.

As such if you, as many, consider your accountant would be your 1st port of call for Financial Advice, they will likely advise you, they are unable to provide the information you require & should consult a qualified Financial Adviser / Planner.

This is general advice only and you should seek expert financial advice from a qualified financial adviser before acting on any of the information covered in these topics.

How might the transition of Baby Boomers into retirement affect the Australian Economy ?

Australia may face headwinds as baby boomers (people born between 1946 and 1964) transition to retirement. Australian financial markets have benefited from their Investment and savings patterns since the 1990s. As this process takes place, Baby Boomers will likely adjust their investment strategies to invest in less volatile options and commence to decumulate assets. The ramifications of this is that investment markets may suffer a reduction in capital over a number of decades.

Taxation will likely need to increase to cover the mismatch between the lower % of people in the workforce, supporting those receiving social security in retirement. Real estate will likely underperform, as Baby Boomers sell or downsize their residences to maintain lifestyle expenditure. The demand is unlikely to met by generations X, Y and Z.

According to the Australian Bureau of Statistics, the main triggers for retirement are:

  • Partner retiring – 17%
  • Unable to find employment – 25%
  • Consider they have accumulated enough wealth to retire – 27%
  • Health reasons – 31%

Alongside this, Australian life expectancy has rapidly increased over the last 100 years:

  • In 1920 it was 61 years.
  • In 1955 it was 69.5
  • In 2015 it was 82.5.

This trend is expected to continue.

At present 70% of Australian receive some form of Age Pension benefits in retirement while 30% are self funded. From the Australian Bureau of Statistics (ABS) 2015 figures of the approx. 24 million Australians, 38% or approx. 9 million, were aged over 45 years of age. Of this 38% one half are not in the labour force, so can be considered retired. In terms of the percentage of Australians retired:

  • Between ages 45-49 – 16%
  • 50-54 – 18%
  • 55-59 – 27%
  • 60-64 – 46%
  • 65-69 – 76%
  • 70 + – 91%

It would seem, without continued strong migration, Australia could face similar problems as Japan has faced over recent decades. With an ageing population deflation has been an ongoing issue for the Japanese economy as can be seen from the performance of their on equity and property markets. The Japanese stock market peaked in December 1989 at 39,000 points and is currently trading at around 25,000 points, approx. 35% lower than its peak just over 30 years ago.

“Success is no accident. It is hard work, perseverance, sacrifice and most of all, a love of what you are doing or learning to do.” – Pele

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