We all like to think that we can retire when we want, and for the lucky few, this is the case. But for the rest of us, when we retire is very much dependent on our Designated Retirement Age (DRA).
The DRA is an intriguing concept. Broadly speaking, DRAs are set by governments to mark the age at which citizens can access a government-funded pension.
They allow governments to plan future funding requirements and create a social framework that guides our approach to work and retirement. But like all blanket concepts, they do not cope well with the fact that each individual is unique.
In Australia, our DRA is the pretty standard 65. This will rise in the coming years to 67, with government plans to raise it to 70.
We’re not the only ones, either. Many countries are raising their DRA to meet the requirements of modern society, or – such as NZ – have abolished it all together.
Where did retirement come from
Though these days it’s all politicians and paperwork, retirement began in Germany, 1889. Then-German Chancellor Otto von Bismark put forward the idea that those who were ‘disabled from work by age’ should receive care from the state.
The age was initially set at 70, then reduced to 65 around 1916.
Interestingly enough, the average life expectancy of the time was barely above 50!
Do we need a retirement age?
Now that society has advanced and people are living longer, happier lives, is it time to retire the retirement age?
A report from the University of Southampton, UK, lead by professor Yehuda Baruch, has scathed the idea of worldwide DRAs and is calling for their abolition.
“We have a global problem with funding pensions, which assume people will retire around their mid-60s,” he said in a press release. “Older people are living longer, often into their 90s, creating, in some cases, up to 30 years of retirement to provide for with their cover. This creates a funding gap.”
Basically, people are just living too damn long.
The fact is, a default retirement age may no longer suit our society. Young people are often starting work later in their lives, having studied for longer, leading to delayed contributions to their superannuation. This despite the fact that males could live to 91 and females to 93 by 2050, according to SuperGuru. On top of that, the report also suggests that society’s perceptions of the elderly are that they are less valuable and productive, even though they are healthier than ever before.
According to the professor, a system would be more beneficial if it allowed flexibility in when people retired. This means those who wish to work until they’re 80 can do so, and those who have worked hard can retire early – with their full superannuation accessible to them from the word go.
“We would like to see a situation where people globally can be much more in control of when they retire,” he said.
So are we drawing to the DRA of the DRA, or will we just keep pushing the age further back forever? As with all things government-based, only time will tell.
If you’re planning for retirement, it might be good to review the ways to boost your superannuation. Alternatively, if you’re looking for a new superfund provider, review the products offered by Virgin Super to find out if they meet your needs.
When do you think people should retire?