More Australians are intending to retire even though they have inadequate savings, according to a recent Roy Morgan survey.
At the same time, a Parliamentary Budget Office (PBO) report released last week reveals how much retirees will cost the economy in the next 10 years. Which begs the question: can Australia afford its growing legion of retirees?
The Roy Morgan poll put the number of Australians intending to retire in the next 12 months at 439,000 – a six per cent increase on the 2018 level of 414,000 and 11 per cent higher than the 2017 figure of 395,000. The savings levels of the intended retirees were well below the recommended level to be self-funded, the survey says. The anticipated result is that this group is likely to be at least partly reliant on the Age Pension.
The Roy Morgan survey says the average gross wealth (total assets excluding owner-occupied homes) of intending retirees is $299,000, up two per cent on 2017 when it was $293,000. The average debt level for this group is $27,000, which reduces average net wealth to $272,000 – a figure “generally considered to be inadequate for self-funded retirement”, says Roy Morgan.
The Association of Superannuation Funds of Australia (ASFA) estimates that an individual needs $545,000 and a couple $640,000 for a “comfortable retirement”.
Roy Morgan communications director Norman Morris says that total savings (including super) are still falling well short for many current retirees.
“A contributing factor to savings falling short of desirable levels has been a reduction in the average age of intending retirees, which has fallen from 62 years, 12 months ago to 58 years currently,” he says. “This obviously has the potential to reduce savings due to a shorter working life.
“Additional pressures on retirement decisions are the declining real estate market, share market volatility and superannuation conditions if there is a change of government. These factors have the potential to delay retirement decisions and encourage people to keep their jobs longer, particularly if the Government tightens up the qualifications for the Age Pension or other retirement benefits.”
The cost of the Age Pension to the economy in 2017-18, according to the PBO, was $45 billion.
In 10 years’ time, it says baby boomers will cost the budget $20 billion more in lost revenue, because most will not be paying income tax.
But is this a problem? The Combined Pensioners and Superannuants Association (CPSA) is not so sure that it is.
“Baby boomers will cost $16 billion more in Age Pensions, aged care and health, but younger generations will also cost the 2028-29 Budget more – $104 billion to be precise,” the CPSA said in a statement. “So all up in 10 years’ time, expenditure will be up $120 billion while revenue will be up $187 billion.
“Australia can afford its baby boomers.”
If you are retired, do you think you retired too early? Are you concerned about the long-term funding of your retirement?