An estimated 81.3 per cent of Gen ‘X’ and ‘Y’ Australians are at risk of falling short of a comfortable retirement, according to a research report from Griffith University, which was commissioned by No More Practice Education.
The report, “Reinvention is the New Retirement”,found that in 26 years a balance of more than $2.09 million will be needed to achieve a comfortable retirement. That figure means that as many as 81.3 per cent of Gen ‘X’ and ‘Y’ won’t make it. If Australia’s long-term inflation rate of 5.07 per cent is used, the figure becomes even more alarming, with $3.98 million needed and 93.8 per cent of Gen ‘X’ and ‘Y’ falling short, the report says.
Marcus Field, managing director of No More Practice Education, an offshoot of the No More Practice television and online promotions company, said: “These are big numbers and a wakeup call that we need to get real about what it’s going to take for us to reinvent our retirement trajectory. It’s clear that we must take real ownership for our financial futures and do it now.”
The research was headed up by Professor Mark Brimble of Griffith Business School and a team of four researchers. He said: “Whilst these numbers represent our worst-case scenario analysed, they are a very real possibility we need to be prepared for: this low-growth scenario has been the reality for countries like Japan for over 20 years.”
The research also examined the coming intergenerational wealth transfer, finding that $3.5 trillion is likely to be transferred over the next 20 years from Australians over 60 to younger generations.
Analysis of the distribution of this wealth indicates that 75 per cent of Gen ‘X’ and ‘Y’ with surviving parents will inherit more than $110,000 – an amount that is potentially materially significant in changing our current trajectory.
Professor Brimble said: “$110,000 invested well for 25 years could grow to be over $1 million, but it is also the sort of amount that could very easily be frittered on lifestyle. Getting people educated on how to invest that money for the long term is vital to all of our futures.”
It is also clear from the research what’s at stake at a national level. If that $3.5 trillion pool is invested in its entirety, the total positive impact to the Australian economy would be up to $11.9 trillion. “Education and advice are going to be paramount in helping Australians navigate the coming challenges. That’s why we’ve brought together some of the world’s best investors as a collective for our upcoming Investment Series TV show, ‘Learn from the Money Masters’, to help solve that education challenge,” Field said.
The show is broadcast at 12.30pm each Saturday on Channel 9 in the eastern states. It features some well-known names in finance as it follows celebrity Blair McDonough as he learns from the ‘Money Masters’ how and why he needs to reinvent his sources of income.