Retirees should prepare to support themselves
Challenges facing policy makers are around reducing the deficit.
Investment markets are likely to treat the budget measures announced today without too much of a reaction. Initiatives to provide additional support for families would be seen favourably as they go towards directly assisting management of heightened cost of living items like housing, health and education, which are generally good for equity markets. Last week’s cut to official interest rates also provides a timely boost to mortgage serviceability, which has a secondary effect of assisting consumer-related sectors.
Beyond shorter term considerations, this year’s budget highlights the challenges facing policy makers around taking politically palatable steps towards reducing the nation’s deficit while ensuring our aging demographic is adequately supported to meet future needs. Like other major economies around the world, longevity risk – the risk of us outliving our savings – presents a significant challenge for funding pensions and entitlements to essential services amid a shrinking tax base.
Initiatives like the ‘Intergenerational Report’ are a step in the right direction as it stimulates debate and policy development for these longer-term issues. Many retirees that I speak to are addressing these challenges and we encourage them to consider options around growing and protecting their savings to reduce reliance on government support which appears to be on a path of gradual reduction.
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Access insights from AMP Capital’s Head of Investment Strategy and Chief Economist, Dr. Shane Oliver to find out what the Federal Budget means for the economy and your investments.
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