Apparently we are all living longer. Thankfully medical advances and a healthier lifestyle means that we are likely to live a lot longer that our grandparents. This isn’t just happening in Ireland, the whole worlds’ population is ageing with 2 people celebrating their 60th birthday every second. Today an Irish woman retiring at age 65 can expect 21 years of retirement while her male counterpart has a life expectancy of 83.
While the stretching of our life expectancy is an overwhelmingly positive development we must also look at the economic impact of our lower mortality rates on our own financial position.
A study authorised by Trinity College in 2012 demonstrates that the number of those aged 80 and older will increase by 53% while the number of over 85’s will more than double from 48,000 in 2006 to 106,000 in 2021.
However in this country we must consider how we are going to pay for our retired population in the years ahead. Currently we have six tax payers for every pensioner we are supporting but it is estimated that this will reduce dramatically by 2030 when there will be only 2.2 tax payers per person retired.
When the Troika came to town we had to use our pension reserve fund to assist in Irelands’ economic bailout. As a result the state pensions are being paid out of everyday coffers with a review of the social insurance fund showing an annual shortfall of €1.5bn last year and this is not shrinking anytime soon. There are three ways the government can tackle this problem; increase pension age, increase peoples’ contributions or reduce the pension payment. So far the government has only taken option one, increasing the retirement age to 67 in 2021 and then up to 68 from 2028.
With all this in mind we must consider how we will deal with our own finances as we get older. Should we all get used to the idea that we will be working far longer than our parents and grandparents. Is the realisation ever going to hit that we will have to fund our own retirement. Certainly when you consider the evolving demographic landscape it becomes apparent that our financial decision making will have to alter as we age our way through the 21st century.
First Printed: Summer 2013