Cost of forced early retirements laid bare

Early retirements due to ill health cost Australian's $20.8 billion in superannuation each year and provide $45.3 billion hit to the economy.

After a lifetime of working, Alison Park had planned to retire by her late 50s with her mortgage at least mostly paid off and with ample choices as to how to spend her hard-earned cash - including on travelling.

But life had other plans.

By 50, the Tasmanian's aggressive inflammatory arthritis led to a doctor telling her that if she didn't stop working, she would soon be dead.

"My rheumatologist said if you keep going like this, I'll be coming to your funeral by the end of the year," she told AAP.

Ms Park was forced to retire from her job as director of nursing at the Royal Hobart Hospital in 2007 and found her financial plan was turned on its head.

"It was a complete 360, I had to rework everything," she said.

She counts herself "eternally grateful" that she was permitted by the terms of her superannuation to draw on those funds early.

But her new lifetime pension meant her income fell to at least a third of what it was, making repaying her mortgage and saving for any indulgences challenging, after paying for medications and appointments.

"You make the best of what you've got," she said.

"I've often said, and friends laugh, that if it means baked beans on toast for a week to be able to do what I do, then I do it."

According to new research, Ms Park is not alone in feeling the financial strain of retiring early due to ill health, and neither is the Australian economy.

A hefty $20.8 billion is lost each year in superannuation funds due to retirements forced by illness between ages 50 and 54, the study by Victoria University has found.

Individuals lost on average $142,100 - compromised of $118,600 in balances foregone and $23,500 in funds withdrawn.

Such retirements also cost the nation's gross domestic product $45.3 billion, or about 2.5 per cent of GDP.

Professor Bruce Rasmussen at Victoria's University's Institute of Strategic Economic Studies says that's a significant blow to the economy and more than the government spends on defence annually.

He said the cost of people retiring early due to ill health is far greater than some initiatives that may help them stay healthy and at work.

"One of the suggestions might be that there should be better screening of both mental illness and muscular-skeletal problems, probably in the workplace," Prof Rasmussen told AAP.

"The idea of getting onto these things early, as we've learnt in so many treatment programs, is a real advantage."

The research, which Medicines Australia commissioned through the McKell Institute, involves fresh analysis of Australian Bureau of Statistics's Household Income and Labour Dynamics in Australia survey.

Health conditions typically associated with early retirement include psychological and psychiatric illnesses, particularly depression and anxiety, and musculoskeletal and connective tissue conditions including osteoarthritis, osteoporosis, neck and back problems.

Source AAP

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