Have you read the Australian Government's 2015 Intergenerational Report, released in March this year? I'd be surprised if you had, yet this document has profound implications for both your personal and professional lives.
The report measures the long-term drivers of Australia's economic growth. One of these is our changing population structure, with some startling shifts predicted. The report finds that:
So is this good news or bad news for medical professionals?
Well, Australia's changing demographics are likely to increase demand for health and aged care services which is, of course, good for medicos from a financial perspective.
But it's a little more complicated than that.
How long will you live?
Living longer and continuing to be active is great provided that you have the money to support yourself.
Medical professionals spend a lot of time thinking about their patients' health and life expectancy, but what about your own? You may have done your financial planning assuming that you will live as long as people average today but, in fact, the intergenerational report suggests that you are likely to live longer.
Check out this life expectancy calculator to get an understanding of your likely life expectancy.
How much money will you need in retirement?
Consider this for a moment. If you are 35, just 'hitting your straps' in terms of income, and plan to stop work at 60, you have 25 more years of work to set aside funds for your retirement. That sounds reasonable, doesn't it?
Possibly. But if you turn out to be one of the lucky ones to reach 100 years of age, you will need to have sufficient investments to support you for another 40 years of living after retirement. Sobering isn't it!
Probably the biggest challenge we face in helping our clients plan for financial independence is getting them to understand how much money they will need to ensure they don't outlive their capital. So what is a safe amount of income to be able to take without eating into the capital? The accepted figure is around 4%. So, if you would like to have $200,000 per annum during retirement, and your retirement will last 25 years, you need to set aside a lump sum of $5 million. If you live longer, you will need even more. Are you on track for this?
Do I really need to worry?
When we raise this issue with clients, medical professionals will sometimes tell us 'But I'll continue to work' or 'My expenses will go down when I no longer have the school fees and mortgage to pay'.
And what do our financial planners say? Well, we explain that you may wish to work past 60 years, but wouldn't it be better to do this from choice rather than necessity? What's more, the job of a medical professional is actually quite physical and stressful. Many medicos end up scaling back their practices as they age and start to feel the stress of long days with patients, carrying out surgery, being on call, and generally supporting others. It's not an easy job.
As for cutting back on your expenses, I'd ask you to reflect on your current spending when you aren't at work. Personally, when I'm on holiday, I actually spend more money! And how do you want to spend your senior years? Wouldn't you like choices about where you go and what you do? There's a massive difference between my 60-year-old clients who can choose to retire, and those who feel that they have to work. It's no fun to be ageing and still trying to pay down debt.
Medical Financial Group's key role is to help our clients understand how financial independence looks for them and then empower them to make smart financial decisions to get them there. Our Brisbane-based experts are happy to provide financial planning, accounting and tax advice to medicos right across Queensland.
The ageing of Australia could be very good news for you professionally and personally but, as we live longer, you need to make the right financial choices. Are you planning to enhance your financial future?
|Tags: News Wealth Creation Financial planning|
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