Australians Can Teach Us About Retirement

I think it’s common knowledge that the chances for a financially secure retirement are — for many of us — about as good as our chances of winning the lottery, but the challenges of planning for retirement face the citizens of other countries as well. There’s a lot Australians can teach us about retirement.

Australians can teach us about retirement

Faced with many of the same problems as we here in the U.S. face,

Australia made changes to their pension system in order to serve retirees more efficiently.

During the ’90s, Australia looked at demographics and realized the need to improve retiree pensions. In addition to a means-tested pension system, the Aussies began a mandatory program, where employers contribute (currently 9 percent) to investment funds. The compulsory “Superannuation Guarantee” is augmented with private savings and non-superannuation programs to provide a third leg for retirees.

Superannuation is “an organizational pension program created by a company for the benefit of its employees.”

The first thing we should learn is to limit access to retirement funds.

While individually owned, stringent guidelines restrict participants’ access to Superannuation funds prior to retirement.  Conversely, Americans have relatively easy access to retirement funds. Human nature and temptation being what they are, no one should be surprised to learn 50 percent of employees cash in 401(k) plans when switching careers.

Don’t pay fund managers more than is absolutely necessary, unless you like giving money away.

Our current hodgepodge of IRAs, 401(k), 403(b), et al, allows financial croupiers to rake profits from participants. Recently I found a 403(b) participant at Northwest Florida State College paid over 3 percent annually on their deferrals. The Class C shares used had an annual expense ratio over 2 percent and the advisor tacked on an additional 1 percent.

Take the time to learn about investingplease!

In addition to good wines, Australians appear to put more emphasis on financial literacy programs than we do.  A sobering Securities and Exchange Commission report found Americans lack understanding of rudimentary financial concepts like interest rates, mortgages, risk and inflation.  More advanced ideas like portfolio diversification or differences between stock and bonds flummox investors.  The lack of basic fiscal knowledge inhibits your ability to retire comfortably.

Many of us are woefully ignorant about the most basic investing concepts. There’s a lot Australians can teach us about retirement.

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