I thought I’d take a quick break from the “Starting Out On A Roll…” series to have a quick chat about this little bit of information that just popped up:
The first cohort of people from the Baby Boomer generation (born in 1946-47) have turned 65.
The Director of ABS Demography, Bjorn Jarvis, said this is a significant milestone for the first Baby Boomers and it raises the question of what the future holds for this large group of people. Will they continue working, retire, travel or something else?
As at 30 June 2012 there were 249,800 people aged 65, which was 37,500 more than the number of people aged 65 in June 2011, according to figures released by the Australian Bureau of Statistics (ABS) today.
Source: Australian Bureau of Statistics
A significant milestone indeed.
With the end of World War II in 1945 Australia’s servicemen and women returned and family life resumed after an interruption of almost six years of wartime conflict. Nine months later saw the start of a population revolution as childbirth rates soared – more than four million Australians were born between 1946-1961.
Putting those two pieces of the puzzle together we have roughly 4 million Australians that will enter into the official Australian age of retirement (65) all starting off this very year. According again to the ABS, after roughly 3 years of “Baby Boomer” years there was an extra 1 million people in Australia, at least from what I can tell playing around on this graph – the red and orange lines are from 1946 to 1949.
So this means that over the period of 2012, 2013 and 2014, we will be having roughly 1 million Australian’s officially reaching retirement age. This will allow them to start accessing their Super and get going on all that porch rocking they’ve no doubt been drooling over the past 40+ years.
But what does it mean for you? Have you just bought your first home? Have you been in it for a few years now? Are you still looking? Well unfortunately it’s all quite “random” I’m afraid.
Many people claim to have the answer. They put forth very logical and factual arguments saying things like “ohh the house prices are too over valued they HAVE to come down” or “ohh the economy is tanking this will mean prices are definitely going to fall” or “ohh the auction clearance rates last week were 60%! It’s the perfect time to buy!”. But they’re more often than not wrong.
The thing is, many might look at the above facts from the ABS and start thinking that ALL those Baby Boomers will soon “sell off” their ever loved investment properties, causing a catastrophic fall in Australian house prices. If you have 1 million (or even half of that) houses flood onto the market over a 2-3 year period supply goes through the roof, demand can’t keep up and basic economics 101 tells you prices MUST fall. Trouble is, life is just a tad random.
Sure, the above scenario MIGHT happen. However a number of other things could happen too. Mining could fall even further kicking out the floor from numerous businesses the country over. Job loss could sky rocket amid more budget cuts causing people to be forced into bankruptcy and lose their houses… causing another massive surge in supply. In two days the entire world could end… or it might not. The government could announce that due to budget cuts, Negative Gearing will no longer be a “thing”.
Point is, it’s impossible to predict. We humans are such fickle creatures and at the end of the day, even IF the economy tanks or house prices fall or sky rocket most of the time you just have to worry about how it all affects YOU. So what IS the best thing you can do to help hedge yourself against any of these dire apocalyptic predictions? For the cases where you have a long term mortgage it’s actually pretty simple.
Give yourself more financial freedom, pay down your debt and Mutilate That Mortgage.
*As a side note I’d also like to add that having a few grand in an emergency account is quite critical, however if you have a Redraw or Offset Account option on your mortgage this point is mostly irrelevant as you can just use that instead.
The benefits include: 1) How to pay off your mortgage faster than 99% of people with one hour a month of work 2) How to get rid of your debt and have the freedom to spend money on the things you love, guilt free 3) Clear outline of how to setup your expenses, mortgage and general finance 4) How offset accounts work and how to get the same result without being gouged by the big banks 5) How to cut through the crap and focus on the things that truly matter when taking down a mortgage 6) How to adjust the strategy so it works for you, even if you have kids, even if you only have one income 7) How to do all of these things and maintain a normal social life (and never be cheap).