Pension age to rise to 70?

The time has come to take control of your super

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

To help Australia cope with an ageing population, the pension age could be pushed back to 70, according to a report from the Productivity Commission.

Currently the age when Australians are entitled to claim a retirement pension is 65, but will gradually rise to 67 by 2023. That won't mean much for those retirees with enough funds to sustain them in retirement, as they are unlikely to be able to claim a pension.

But it would help Australia cope with a rising older population, as retirees live longer, and as a consequence we also have more retirees. It will also mean a lower percentage of people working, and potentially lower tax revenues, but at the same time, higher government costs for health, aged care and pensions. Labour participation rates are expected to fall from 65% to below 60% by 2060.

According to the report, Australia is projected to have 4 million people more people aged 75 years or older by 2060, and a total population of around 38 million, 15 million more than currently. Sydney and Melbourne are forecast to have populations of more than 7 million each, while Brisbane will hit 4.3 million and Perth 3.7 million. Adelaide, Canberra, Darwin and Hobart are expected to have much smaller increases.

Older Australians may also be forced to use some of the equity in their hoses to pay for aged care services, while the pension and retirement income system may be linked to life expectancy. That could see self-managed super fund members and other retirees forced to take gradually increasing annuities, while lump sum withdrawals may be limited.

With life expectancies increasing, a person retiring at age 65 can be expected to life for around another 29 years. This makes it even more important for investors to ensure they have enough funds to support them during their retirement.

Investing in high quality, growing companies like CSL (ASX: CSL) and Woolworths (ASX: WOW) and reinvesting dividends to take advantage of compounding your returns is key.

Equally, avoiding poor-quality, capital intensive businesses such as Qantas Airways (ASX: QAN) as well as companies operating in difficult industries such as Worleyparsons (ASX: WOR), plays an important part in growing your portfolio.

Foolish takeaway

Now, more than ever, investors need to take control of their finances and their superannuation. As we wrote in this article, $1 million won't be enough.

Motley Fool writer/analyst Mike King owns shares in CSL and Woolworths. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »