PRESS RELEASE: The Retirement Crisis is Here, But Young People Continue to Make the Same Mistakes
More than 60% of Australian retirees will run out of money before they die
1. Baby boomers are facing a difficult retirement
Australia is facing a retirement crisis. 439,000 baby boomers are expected to stop working in 2019, and the majority of them are not prepared to support themselves in retirement. The numbers tell a dark story:
– 60% of Australians will run out of money before they die.
– The average Australian will outlive their retirement savings by 5 years.
– 50% of Australians at or near retirement age have nothing in their Super account.
– Only one-third of Australian retirees live on a ‘comfortable’ level of income.
– Average net wealth (including property) of an Australian retiring in 2019 is $272k (Association of Superannuation Funds of Australia estimates an individual would need $545k and a couple $640k for a ‘comfortable retirement’).
This retirement crisis is going to have a dramatic impact on the Australian people and economy. Due to the sheer number of baby boomers retiring over the next decade (estimated ~3 million), this will add significant strain to the public health system, public housing and the government’s budget surplus.
Despite this looming crisis, young people have not learnt from the mistakes of their parents and grandparents. Instead younger Australians are sleepwalking into the same crisis and making the same mistakes.
2. The #1 rule for a comfortable retirement? Save and invest early!
Investing early and allowing the compounding effect of the sharemarket to take hold, is the most important thing anyone can do to prepare for retirement. The effect of compounding is so powerful that Einstein labelled it “the eighth wonder of the world”.
Simply, small differences year-after-year, add up to large differences over a lifetime. Between 1900 and 2010, the Australian stock market has averaged 11.8% growth per year, Australian bonds 6% and saving in cash 4.8%. Putting your money into the stock market, rather than saving it in cash, has been critical in setting people up for a comfortable retirement.
The numbers below demonstrate the powerful compounding effect:
If you put $1,000 in and left it for 40 years…
– In cash, you’d have $7,000 (4.8% p.a.)
– In bonds, you’d have $10,000 (6% p.a.)
– In stocks, you’d have $87,000 (11.8%)
If you started with $1,000 and added $1,000 every year for 40 years…
– In cash, you’d have $122,000 (4.8% p.a.)
– In bonds, you’d have $165,000 (6% p.a.)
– In stocks, you’d have $812,000 (11.8%)
Forget relying on your job to set you up for retirement. Numbers from the US demonstrate how drastically the share market has outperformed wage growth. In the 40 years between 1971 and 2011, the average US worker saw a 3.2% real wage increase (i.e. after inflation). In that same period, the US stock market saw a 759% real increase.
Equity Mates Media co-founder, Bryce Leske, sums it up with, “since the creation of the joint-stock company, nothing has created more wealth for more people than the share market. It is the greatest wealth creating machine history has ever known.”
3. Despite this history, young people are choosing not to invest.
The generation that grew up in the shadow of the GFC prefers to save their money in cash. This will have serious implications for their financial futures. Some concerning facts:
– 3 in 10 millennials say saving in cash in their preferred investment.
– 66% of working millennials aren’t saving enough for retirement.
– 43% of millennials are not invested at all.
– 45% of 25-34 year olds claim they do not have enough money to invest.
– 78% of millennials feel pressure planning for present and future financial responsibilities. With 28% of millennials feeling so much pressure it affects their work.
4. Introducing: Get Started Investing
To help young people understand the importance of saving and investing in the stock market, the team behind the top-rated Equity Mates Investing Podcast have released a new twelve-part series, Get Started Investing. This podcast breaks down barriers preventing young people entering the market and gives people the skills and confidence to get started themselves.
Co-founder of Equity Mates Media and the series co-host, Alec Renehan, explains that the series was borne of a frustration in his co-host’s and his personal experiences when they started investing.
“There are so many barriers to getting started investing. From all the industry jargon to a sensationalised financial media, it was daunting to get started. So for years, I didn’t,” says Alec. “Once you break through these barriers and get started, you understand just how important investing is for your financial future. We see Get Started Investing as a tool for more people to understand how critical saving and investing early can be to building long-term wealth.”
“With Get Started Investing we hope to introduce more young Australians to the great wealth creating machine the world has ever known. In doing so, hopefully this generation will be better prepared for retirement than their parents and grandparents generations.”
This podcast can be found on the Equity Mates website, Apple Podcasts, Spotify or by searching ‘Get Started Investing’ in your preferred podcast player.
For more information, please contact:
Alec Renehan | 0423 304 947 | [email protected] | www.equitymates.com
