Only 3 per cent of Australians are planning to provide for the costs of aged care as they grow older and the prospect of old age poverty is making some people suicidal, according to a new report from lobby group National Seniors.
The report’s author, Professor John McCallum, said life expectancy for those aged 65 had increased by around six years since the 1980s. “That means Australians must now do something their parents and grandparents didn’t think about – plan for a longer life,” he said.
As a result “earnings from 40 to 50 years of work may have to cover 80 to 90 years of life, but medical and aged care bills tend to get higher as we get older and few people are ready for this”.
But for most people, catering for their increased needs as they age is not on the radar.
Just 3 per cent surveyed by National Seniors planned to spend more money in later life; 61 per cent planned to spend the same amount throughout retirement, and 36 per cent said they wanted to spend more in the early years after giving up paid work.
Perhaps most concerning of all, around 70 per cent of people have no savings by the time they reach extreme old age and go into base level care, where homes cost about 87 per cent of their pension payments.
However “those in the middle could choose the type of care they wanted if they plan it”, Professor McCallum said.
The prospect of running out of money in retirement can be terrifying and “the depth of despair in some people surprised me,” Professor McCallum said.
Some respondents to the survey took particularly bleak views of their situations. “Suicide is an option when funds expended,” said a 62-year-old man.
“I am working myself to an early death so my lifespan will not be longer than those in previous years,” said a 58-year-old woman and “I can only hope I am struck by a bus before I become feeble and not care for myself”, said another woman aged 73.
To deal with old age poverty, a majority (56 per cent) surveyed favoured an insurance option in superannuation that paid an income once members reached 85. The proposition of forcing people to pay 10 per cent of their retirement savings into a fund to pay income for life was supported by 56.8 per cent.
Professor McCallum said “bringing compulsion of some kind” to provide old age income was justified.
Paul Versteege, policy coordinator with the Combined Pensioners and Superannuants, said Australia’s retirement system needed a major overhaul to cope with an ageing population.
“We need a social insurance system that covers Medicare, disability and aged care,” Mr Versteege said.
“Western European countries have that but we leave it up to people to provide for their own….. it’s a radical step.”
Pat Sparrow, CEO of Aged and Community Services Australia, said the aged care system needs to develop more options for people. “We’re all living longer and we need to think about that. As the population grows and ages we need to increase the user contributions.”
Around 22 per cent of survey participants disclosed that they ‘hadn’t planned at all’ for an increasing lifespan.
The realities of ageing mean that people are spending more of their money themselves. Only 3 per cent intended to preserve all their savings for the next generation, whereas 10 per cent expect to spend all their money on themselves.
Another 41 per cent planned to spend most of their money while 46 per cent planned to preserve some and spend some.
Anyone feeling severe stress about their finances could call Lifeline, 13 11 14 or Beyond Blue 1300 224 636.