Some realities about funding for retirement

Empty wallet in the hands of an elderly man. Poverty in retirement concept

Image: perfectlab/Bigstock.com

Most Australians don’t think they’ll have enough income from superannuation and investments to live a ‘comfortable lifestyle’ in retirement—according to an Essential Vision survey.

The survey asked individuals who worked full time or part-time, or were self-employed this question: ‘Do you think that you will have adequate income from your superannuation and investments to live a comfortable lifestyle when you choose to stop working?’

Note the responses—and the ages:

 Aged 18-34Aged 35-54Aged 55+
Yes—definitely11%5%12%
Yes—probably36%30%24%
No—probably not28%37%38%
No—definitely not10%17%20%
Not sure14%12%7%

Of those in the 55-plus age and closest to retirement, only 36 per cent give a ‘yes’ answer, if you also include the ‘yes—probably’ response. 58 per cent are saying no, when you include the ‘no—probably not’ response. And 7 per cent are uncertain.

Please note that this survey is specifically about superannuation and investments. It doesn’t include the aged pension. What the survey does is help confirm the reality that most Australians believe they will need the pension to help their retirement funding.

The survey also shows the uncertain financial position of individuals closest to retirement age. The two ‘probably’ and ‘probably not’ responses in the 55-plus group total 62 per cent.

There is more confidence in the 18-34 age group (47 per cent giving a ‘yes’ response), compared to both the 35-54 age group (35 per cent) and 55-plus age group (36 per cent). That may be because of realities settling in or becoming obvious as individuals age. Or perhaps the younger ones think they have their retirement planning together better than those who are older.

To work or not to work?

That will be the question many retirees will ask as they approach retirement age. Should you plan to continue to work after retirement age to help fund your retirement—either full time or part time?

Of course, you may want to start a new career. You may want to get into a less stressful role. You may want to be a consultant in your profession, which may give you flexible hours.

There are many options available.

An extensive US study found that 60 per cent of Boomers who hadn’t yet left their full-time jobs expected to keep working—at least part time. Surprisingly, of those in the survey who had ‘retired’ and found other jobs, 80 per cent said it was easy to find their next job.

Bankers Life (BL) had funded the survey and BL president, Scott Goldberg, pointed out, ‘As the next wave of Boomers retires, the competition is likely to intensify. But … there is good evidence to suggest that future retirees will have an even greater number of positions to consider, even if the competition for those roles gets more intense.’

Two problems

From the survey and experience in the US, almost three quarters were earning less (53 per cent said ‘much less’) than they were in their old job. That didn’t mean they were unhappy, though, with 80 per cent saying they liked their current job better than their old one.

They also reported having less stress and better relationships than the Boomers who had not yet retired.

The other problem comes from so many not being able to choose when to retire. In this case, 69 per cent had no choice. Health was the number one problem (39 per cent), being laid off and not being able to find another job came next (19 per cent), and, then, retiring to care for a loved one (9 per cent).

This is a significant problem in Australia even if our percentages are lower (around 40 per cent for health and loss of job).

Handling the realities

Awareness of the realities is the first step in being able to manage them successfully. Not everyone has a dream retirement. No one has a retirement go exactly to plan.

Realities may mean a change of priorities and direction in retirement. With the right attitude, though, Plan B can work and be fulfilling in different ways to Plan A. Your attitude will be key to making it work.

Bruce Manners: the author of Retirement Ready?, Refusing to Retire, and founder of RetireNotes.com

Category: Finances

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