Apr 28

An Ageing Population

We Are All Part of An Ageing Population

According to the United Nations Population Division, we are all living through a period of ageing population that is unparalled in the history of humanity.  This process is a result of reduced mortality rates due to better living standards, and declining fertility rates.

Although this ageing population phenomenon is across the world the trend is significantly greater in developed countries.  According to statistics, it is predicted that by 2045 globally the number of people aged 60 or over will be greater than the number of people aged 15 or under.  However, in more advanced countries this milestone was reached in 1998, and the attendant issues have needed to be addressed in an on-going manner by governments. 

The reduction in the labour force, spending by older people differs significantly from that of younger people and government expenditure on items such as healthcare and pensions increases.  The economic changes exert added pressure to government budgets.  According to research from Standard and Poors, total age-related expenditure as a percentage of GDP is estimated to be in 2050, 27% in Japan, 29% in Italy, 30% in Germany and 32% in France.  Will these percentages be sustainable or will government debt rise to a level of unsustainability?

In Australia we have seen various federal governments introduce levies for healthcare and sustained pressure for people to be less reliant on the age-pension couples with an increase in retirement ages.  In more recent times similar practices have been introduced in other parts of the world many as a result of the global financial crisis and reduced government finances.

In addition to the ageing process, people in developed countries have been consumers of many luxuries and their greater expectations of service and of services will continue into retirement. Healthcare is expected to be a major driver of continued government reform. Added to this is the greater impact of a large voting ageing population, and even though the population is ageing and today’s 70 year old may be yesterday’s 60 year old, the human body inevitability declines with age, so the pressures on healthcare systems will also inevitability increase.

According to the US Bureau of Labor Statistics data, the expenditure on healthcare jumps significantly with age and they indicate that where average annual expenditure for ages 25 – 34 is under 5%, at ages 65 and over this jumps to 12%.  From a financial services investment this can be seen as opportunities for investments in healthcare and retirement living.

An increased retirement population also offers opportunities for recreational activities such as travel, sport and volunteer-based activities.  So not all is reliant on governments, and there will be opportunities in the years ahead for astute investors.

With future life expectancy likely to increase due to medical technology and healthier lifestyles it's important to plan for your retirement and superannuation. We are seeing in many countries the retirement age increasing but it's important to ensure that you have enough funds to live comfortably throughout your retirement life.

It's important to see a financial advisor to identify your needs and plan for your retirement. Unfortunately we often see people who have limited funds and have to cut out some of their more costly monthly payments to get through retirement.  Imagine the madness in reducing or cutting out private health insurance that has been paid for many years and is needed the most at this stage in life!  Speak with your financial planner and advisor today about your superannuation retirement funds.

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