We are continuing to live longer

According to recent statistics released from the Australian Bureau of Statistics, there is a continuing trend for Australian men and women to live longer.

A baby boy born in 2007-2009 is expected to live, on average, 79.3 years. A baby girl born over the same period is expected to live, on average 83.9 years. Over the decade to 2009, this represents an increase for males of 2.7 years and for females 1.9 years. Females are still expected to live longer but males are catching up.

A similar trend appears in the residual life expectancy at age 65. Females age 65 in 2007-2009 are expected to live another 21.8 years to age 86.8 (an increase of 1.4 years) and males another 18.7 years to age 83.7 (an increase of 1.9 years).

Our increased life expectancies have been attributed to improvements in aged care management, medical advances resulting in a decline in the number of deaths from chronic health conditions (e.g. heart disease, cancer and strokes) and behavioural changes such as improvements in diet and lower rates of smoking.

Although it is good news that we are expected to live longer, it does have financial planning implications. If we are living longer in retirement, our retirement funds need to last longer. This issue is magnified just because you are a member of a couple as both of you are expected to live longer.

Whether you are saving for retirement, about to retire or already retired, a financial planner can assist you in meeting your retirement income needs. Professional financial advice could be the difference between supplementing your retirement income with the Age Pension and entirely relying on the Age Pension to meet all of your income needs.

Mortgage stress

In Australia, the proportion of household disposable income dedicated to interest payments (known as the debt servicing ratio) is quite high at 12%. In comparison, the previous high was 9% just prior to the 1990’s recession.

Given the high debt servicing ratio, the global financial crisis and the rising cost of living it is no surprise that an increasing number of Australian households are facing mortgage stress.
In the first half of this year, the big four banks reported an increase in the value of loans considered to be 90 days in arrears. Westpac reported an increase of 35% since September 2010.

If you have outstanding debt you may be at risk of mortgage stress. It is important you can identify the signs of mortgage stress early and act as soon as possible.

If you are worried or experiencing mortgage stress you should speak to your financial adviser. Your financial adviser can assist you in creating a budget or in some cases, help you access your superannuation savings to help alleviate mortgage stress.

Legal Aid NSW has produced a Mortgage Stress Handbook which can be accessed from the Legal Aid NSW website, www.legalaid.nsw.gov.au and search for ‘Mortgage Stress Handbook’.

Social Security pension payments increase

If you are receiving an income support payment from Centrelink or the Department of Veteran’s Affairs, your payment increases from Tuesday the 20th September. Pensions increase by up to $19.50 per fortnight for singles and $29.60 per fortnight for couples.
This pension increase reflects changes to the Pension and Beneficiary Living Cost Index of 2.7% for the 6 months to June 2011.

What is the Pension and Beneficiary Living Cost Index (PBLCI)?

The Pension and Beneficiary Living Cost Index (PBLCI) measures the change in disposable income of households whose received mainly from government pensions and benefits. This differs from the Consumer Price Index (CPI) which measures price inflation for the household sector as a whole. Since the PBLCI began in the June quarter of 2007 it has risen 16.2% compared to 13.2% for CPI. For the June quarter 2011, the most significant price rises were for food (+1.4%), transportation (+1.7%) and household contents and services (+1.2%).

Given the increased relative cost of living for pensioners combined with fluctuating sharemarkets, many pensioners are questioning the adequacy of their retirement plan. Some retirees have even returned to casual or part-time employment. If you are feeling the pinch of rising living costs, are worried about the longevity of your retirement savings or are currently retired but considering returning to casual or part-time employment, then you should be speaking to your financial adviser.

RI Advice Group Pty Limited ABN 23 001 774 125, AFSL 238429. This information does not consider your personal circumstances and is general advice only. You should not act on any information without obtaining professional financial advice specific to your circumstances.