People are seriously underestimating how much money they need to retire.
New research from AMP has revealed a huge disconnect between how much Aussies believe they need for a happy retirement and what they actually need.
According to AMP’s ‘Super Shortage’ research, for Australians to live the retirement lifestyle they aspire to from 65, their savings will last just five years. With the average life expectancy of Australians being 82.5 years old, this creates a super shortage of 12.5 years.
YourLifeChoices’ research shows that almost 80 per cent of retirees are worried that they will outlive their savings and members articulated those fears in the most recent Retirement Affordability Index.
AMP financial advisor, Dianne Charman, said the findings are worrying as they reveal a big gap between expectation and reality, with Australians currently saving much less than what they need to live out their expected lifestyle in retirement.
“Most of us want to retire early and we want to be comfortable,” Ms Charman explained. “However, with life expectancy continuing to rise, we are potentially leaving ourselves short of cash in our retirement years.
“The research suggests many Australians are facing the prospect of having to push out their retirement plans by at least 10 years.
“The reality is that today we need to make our earnings from 40 to 50 years in the workforce, extend across 80 to 90 years of living.”
Not surprisingly, the research found the super shortage for Australians who retire at 65 years old is greater for women (14 years) than men (12 years).
However, women clearly understand they might be left short when they hit retirement age, with 71 per cent saying they are worried about having enough money to retire, compared with only 50 per cent of men who expressed the same concern.
Ms Charman said factors such as the fact that women tend to live longer than men and have time out of the workforce made it even more essential that they accumulate enough super to last through retirement.
The research also found that Australians in a relationship had a greater super shortage (14 years) than those who are single (11 years).
“It’s important to think about your retirement goals and whether your super contributions will fund the retirement you want early on in life,” Ms Charman explained.
“Planning early will go a long way towards bridging the super shortage between the retirement we want and the one facing us.”
Are you worried about outliving your retirement savings? What are you doing to address these concerns?