Rethinking Retirement Report 2024
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“Sooner or later, everyone sits down to a banquet of consequences.”
Colonial First State conducted a national survey of 2,247 Australians to gauge their views on retirement. All respondents held either a superannuation, pension or annuity account or have investments in their name and are the sole or joint decision maker.
Key findings:
We want flexibility and choice in retirement.
We benefit from greater engagement with super and access to advice.
Advised individuals are twice as likely as unadvised to retire at a time of their choosing.
Retirement is generally being enjoyed, despite concerns leading up to it.
We have summarised the results of the survey below.
Retirement Intentions
There appears to be a noticeable shift in retirement attitudes emerging, with more Australians opting to continue working beyond the traditional retirement age of 67. Surprisingly, fewer than one in three Australians plan to retire completely by this age. Instead, people have diverse preferences for how they want to spend their time after retirement.
For many, the ideal scenario involves working fewer hours, while others prefer to keep working the same hours. Some are interested in pursuing passion projects, even if it means earning less and working less. And there is a significant group that wants the flexibility to work on and off, or to switch to less demanding jobs. Interestingly, very few plan to study or retrain after retiring.
These preferences pose a challenge for policymakers, who need to consider how older Australians can help fill labour-force gaps and skills shortages. Besides work preferences, most Australians also want the flexibility to access their retirement savings when necessary. They also prioritise leaving some of their savings behind for their families.
Three-quarters of Australians plan to leave part of their superannuation to their loved ones, with many aiming to leave more than 25%.
One retiree said: "So they have enough to retire themselves. The cost of buying a house is beyond reach for younger people now. A little help from me when I die might help pay off their mortgage and allow them to retire at an appropriate age."
Retirement aspirations are evolving, with more focus on continued work, financial flexibility, and support for family. Policymakers will need to consider these changing dynamics to create retirement frameworks that are inclusive and sustainable.
Retirement Perceptions
Engaging and seeking professional advice can significantly enhance one's retirement prospects and overall satisfaction in the golden years, however when it comes to planning for retirement, Australians prefer a hands-off approach to super.
Only 37% of Aussies would turn to their super fund for guidance on retirement planning. Even among pre-retirees aged 50 to 64, just one in three want to hear from their super fund about retirement matters in general.
"How much money do I need to retire?" is the most common question never asked. This reluctance to seek information and advice reflects a broader trend among many Australians.
Retirement goals are highly personal and influenced by a range of factors such as family circumstances, homeownership, and health. When individuals were asked to estimate how much they would need to retire comfortably, the average response was $1.6 million. In contrast, the ASFA Retirement Standard suggests that a super balance of $690,000 for couples and $595,000 for singles is sufficient for a comfortable retirement.
Advised Australians, even with similar net wealth and income as unadvised individuals, tend to be more positive and confident about their financial situation. This underscores the valuable role that financial advice continues to play in retirees' lives.
The research found a difference in retirement experiences between advised and unadvised Australians. Those who received professional advice are twice as likely to find retirement easier than expected. Over three-quarters of advised retirees report currently enjoying their retirement, compared to just half of those who never sought advice.
While many Australians may hesitate to delve into retirement planning and seek advice, the benefits of doing so are clear.
Retirement Planning
For many Australians, retirement is not always a choice. Two out of three find themselves retiring out of necessity rather than by design. The top reason? Health concerns, either their own or their partner's, often force the decision. Factors like redundancy or feeling sidelined in the workplace also contribute to unplanned retirements.
One retiree said, “Due to my age no-one would employ me, despite decades in the retail food industry. They can pay younger people less but don`t take into account that I just wanted to work”.
Those who have taken a proactive, long-term approach to planning retirement income are usually in a better position. They tend to have more financial resilience and confidence as they age. This is where financial advice comes in, offering Australians greater control over their retirement timeline. The research shows that those who seek advice are twice as likely to retire when they want to.
While many Australians do not have the luxury of choosing when they retire, planning and seeking advice can make a world of difference in how retirement unfolds.
Retirement Realities
A common concern among Aussies is the fear of running out of money once they retire. Yet, surprisingly, this fear does not seem to be dampening their willingness to dip into their super once they have hung up their work hats. Eight out of ten Aussies who reach retirement age or beyond feel confident about spending their retirement savings. For seven in ten retirees, their nest egg is stretching far enough to afford them a comfortable retirement.
But what does a "comfortable retirement" mean? For some, it is the basics: having enough for food, petrol, and a roof over their heads. Others dream of a bit more luxury – being able to dine out once a week, travel around Australia in a caravan, or even jet-setting overseas every few years without pinching pennies.
Retirement is not just about kicking back and relaxing, though. Many retirees find themselves busier than expected, while others grapple with the rising cost of living and health concerns. The research shows that half of Aussies at or above retirement age worry about falling Ill and the escalating costs of healthcare.
While Aussies might have their retirement funds in order, there is still a fair bit of uncertainty and variability in what retirement looks like for each individual. From the essentials to the indulgences, retirement dreams come in all shapes and sizes.
Final Thoughts
Every Aussie's journey towards retirement is unique, shaped by individual circumstances and goals. For some, it is about taking that first step – asking questions, exploring options, and gaining clarity.
Most want to dip into super when needed and to keep working beyond the standard retirement age. Yet, many are unsure about when they can afford to retire and how much money they will need to make those golden years truly golden.
This research shines a light on a key factor: planning and engagement. Start planning early, get cozy with super, and seek advice. You will then likely feel more confident and in control of your retirement timeline.
Retirement is not just about reaching a certain age or hitting a financial milestone. It is about crafting a future that you desire.
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Please contact us on 03 9268 1118 or ahenderson@shawandpartners.com.au to discuss our services further.
The information presented is solely for educational purposes and is of a general nature, with no consideration for your specific objectives, financial position, or requirements. It is not intended to replace professional financial advice, and you should evaluate its suitability in consideration of your individual circumstances.