I have been travelling for the last five weeks, but thanks to PressReader have been kept abreast of everything that is happening in the financial world in Australia.  The big news was the release of the Intergenerational Report, which was of particular interest to me because I was one of the people in the focus group.If you go to my website, you can view a video which was made at the time – The Challenge of Change.

The report contains some scary statistics.  Within 40 years the life expectancy of the average male will be 95.5 years, and for a female 96.6 years.  The population will be almost 40 million, and include more than 40,000 people aged over 100.

The good news is that average annual income is expected to rise from $66,400 to $117,300, which will boost the property and share markets.  The bad news is that there will be just 2.7 people aged between 15 and 64 – potential taxpayers – for every person aged 65 and over.

It is a wake-up call for every Australian.  If you are under 40, you have time for compound interest to work its magic, which should enable you to build a decent portfolio if you start now and choose the right mix of growth assets.  You will need this portfolio because you may well live to 100, at which time the age pension is certain to be severely restricted.

If you are between 40 and 65 you cannot afford to rely solely on employer paid superannuation.  The age at which you can access the age pension is being raised, and there are calls to raise the superannuation age to 67 to match.  The best strategy for you is to salary sacrifice to the maximum, and hone your skills so that you can work as long as possible.  This will increase the power of compounding and make your money last longer, as it will delay the time you need to start making withdrawals.

Are you already over 65?  Don’t panic.  Any changes to the age pension will come in gradually, and are certain to be grandfathered.  However, you need to be getting good financial advice to ensure your money works as hard as realistically possible.  The alternative is to face the challenge of living longer than your money.

Our taxation system presents grave challenges too.  Currently, 61% of personal income tax is received from a mere 11% of taxpayers, leaving the bulk of taxpayers contributing very little.  In addition, 87% of those aged 65 and over pay no tax whatsoever.

A full review of our tax and welfare system is overdue, but the adversarial nature of politics does not make for optimism.  Right now, the federal government reminds me of a dysfunctional family.  Dad and Mum (the two major parties) spend all their time abusing each other and promising the world to their constituents (us, the children); while well meaning but inexperienced relatives (the minor parties) add to the turmoil by telling the kids their parents don’t know what they’re talking about.

Until they all get their act together, and unite with a common goal to get our country’s finances in order, it will continue to be all talk but little action