Updated: Nov 23, 2018
Seventy-seven percent of Australian pre-retirees who haven’t enlisted the help of financial professionals1don’t feel prepared for retirement.
This concerning statistic was revealed in MLC’s Australia today report. Of the remainder, only 9% feel ‘prepared’ for retirement and only 14% consider themselves ‘somewhat prepared’ for retirement.
Retirement is then, this is now
For many Australians retirement seems a long way off. We’re so busy worrying about paying off the mortgage and maintaining our standard of living that retirement planning isn’t on the radar. For some, it’s not even a consideration.
This lack of preparation for retirement is a symptom of a ‘living for today’ mindset that’s emerged in Australia today. More Australians are living pay-cheque to pay-cheque to support a more luxurious lifestyle than their parents. They’re foregoing financial planning for regular travel and entertainment and other lifestyle factors which Australians are now confusing with standards of living.
There’s little left over after our lifestyle expenses, so the majority isn’t feeling positive or confident about their retirement plans.
Ignore retirement and it will go away
Do we think if we ignore the concept of retirement planning, in favour of managing the demands of today’s lifestyle, the ‘problem’ will simply go away, or we’ll just sort it out later? Or is it that we feel retirement is too far away to plan for?
Ironically, if we pretend retirement isn’t there, it most certainly won’t be – at least not how we may imagine in the back of our minds.
Do you anticipate the day you log off from work and become your own recreational boss? Do you picture yourself hiking a mountain, surfing, writing that book, painting that landscape, seeing that play or developing that smartphone app – not because you have to, but just because it’s fun? Maybe you imagine learning the guitar, catching up with friends or taking long walks.
Well, if you’re ever going to stop working or cut back on your hours, you’re going to need a big nest egg to support you.
How big is your nest egg?
With couples needing $58,922 per annum for a comfortable retirement and $34,064 per annum for a modest retirement, and singles needing from $23,000-$43,000 per annum for a modest to comfortable retirement, those who aren’t prepared will face a significant shortfall.2 Especially if you retire at 65 and live for 25 years.
Women and the young are least prepared
Australia Today reveals women are almost twice as likely to feel unprepared for retirement as men. Young people (aged 25-29) and those who live pay-cheque to pay-cheque are also more likely to feel unprepared for retirement.
For many women, career breaks to have children often means less super, and a lower annual income when they return to work. While for those under 30, retirement seems too far off to worry about.
Financial professionals offer a silver lining
The good news from MLC’s Australia today report is that help from financial professionals has an encouraging impact on our financial confidence and security.
Australians engaging the help of financial professionals are more than twice as likely to feel ‘very or fairly well prepared’ for retirement than those without a financial professional. They’re also 21% less likely to feel slightly or not at all prepared.
Those surveyed with financial planners or advisers are also 22% less likely to expect to rely on government support to ensure their financial security (52% with financial advisers compared with 27% without) and are 10% less likely to be relying on an inheritance to ensure financial security (77% with financial advisers compared with 67% without).
What can you do?
If you acknowledge that one day you’d like to stop working while still having control over your lifestyle, think about how much money you’d like each year and what that means as a lump sum. Engaging the help of financial professionals may help you put a plan in place to enjoy the lifestyle you want in retirement.
There are many great calculators online including ASIC’s MoneySmart retirement planner. You can also consider more actively managing your super, investigating and learning more about your investment options, risk/return considerations and timeframes, while topping up your super when you can (depending on your tax circumstances) to boost your retirement savings.
MLC and IPSOS, Australia today report, Aug 2016.
1 1647 of respondents surveyed by IPSOS.
2 ASFA Retirement Standard, March Quarter 2016.