Why it is important to invest in property
A little understanding of how we are supported in our old age by our government should make it clear why it is important to invest in property.
Before Federation, most states had introduced a means tested state pension for older people who could no longer support themselves. By 1910 the new Commonwealth Government introduced the age pension for men over 65 years old and women over 60 years old who had lived in one of our states for more than 25 years. This was probably no big deal as only around 7% of the population lived to be over 65 years of age, and the likelihood is that the majority of these were from relatively well-nourished middle class families who could support themselves. It was not until the late 1930’s early 1940’s the number of over 65’s reached 10% of the population.
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The reality is that all working Australians are making some tax contribution to support our older Australians throughout their working lives and have been doing this for over 100 years. The irony of the situation was that only 1 out of every 10 contributors, at most, lived long enough to benefit from the government scheme! Even back in the 1930’s and 40’s, seventy years of age was a very old person, so even those who made it to age 65 usually only had a very few years of state pension before dying.
It was Keating’s government back in 1993 who recognised that as most Australians, (not just 1 out of 10) were living to 65 and 10 or more years beyond, the age pension was no longer affordable to government. The ‘answer’ was compulsory superannuation and then, more recently, rising retirement age to 67 for both men and women. This still means that the average female in Australia today will have around 18 years to live, the average male around 14 years. Without allowing for inflation, at an average Australian income for these 18 years, the average couple now needs around $1.3 million to live an average life in retirement. For most, it is very unlikely that they will achieve this through superannuation alone, but just one $500,000 property investment could deliver another $500,000 for retirement in just around 10 years of ownership. This one property investment could well be the difference between a comfortable 20 years of retirement or 20 years of living below the poverty line in the later years of life. This is why it is important to invest in property. More and more we are becoming a ‘user-pays’ society, we can’t depend on government handouts in our old age.
If you want to know more about how you can prepare for retirement through property investment contact: [email protected].
