There is a growing gap between what people think they need to retire and what they have to retire, according to new research.
Every two years, financial group AMP commissions a large-scale Financial Wellness report on how Australians feel about their finances. The 2022 study found that you’re not feeling confident about living the retirement you want.
The report found Australians are expecting to retire at 65.4 years, a jump of more than six months since the 2020 report, and only 41 per cent are expecting a comfortable or lavish retirement, compared to 50 per cent in 2020.
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Only one in three respondents said they would be happy to readjust their lifestyle expectations.
“We’re concerned about the cost of living, not having enough saved and having to work later than expected,” the report stated.
“And women, single parents and Australians nearer retirement are particularly worried they won’t have enough.
“Perhaps most concerning of all, the research shows there’s a $200,000 gap between what we expect we’ll need in retirement [$600,000] and what we expect to have [$400,000].”
AMP retirement solutions general manager Ben Hillier said cost-of-living pressures had heightened the issue, but the fear of running out of money was also the result of a basic lack of understanding about finances and the retirement system. And many older Australians feel as if they have left their retirement planning too late.
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“The key takeaway from this research is for all Australians to engage more with their retirement planning, and access resources and help – it’s never too early, or too late.”
The findings are comparable with financial comparison site money.com.au research from a survey of just over 1000 Australians about their current finances. They found that more than half (57 per cent) wanted $60,000 in annual income, 35 per cent wanted more than $80,000 and about 20 per cent wanted more than $100,000.
However, about 60 per cent of respondents indicated that they would not have enough super or cash flow to achieve their expectations.
About 31 per cent of respondents expected to still be in debt at retirement, including with a mortgage (21 per cent) and major credit card debt (4 per cent).
And 73 per cent of respondents expected that they would have to apply for the Age Pension at some point.
Read: Why are older Australians delaying retirement?
Commenting on the findings, online financial publishing portal Firstlinks spokesperson Helen Baker said the research revealed that Australians had an “uncertain” outlook for their retirement.
“The unfortunate reality is that to meet their expected retirement incomes, a large segment of the population will need to work longer or make significant sacrifices,” Ms Baker said.
“Those who are already retired are also facing challenges, as they are unable to build their super, while contending with constantly rising costs, from health insurance premiums to interest rates and energy prices.”
Ms Baker said the pension wasn’t keeping up with the inflation rate, nor was it a realistic amount for those who had debt, paid rent or had costly health expenses.
“There is also a risk that those who are factoring a pension into their retirement plan might not be entitled to it,” she said.
“For instance, couples will be evaluated together, not individually. If your partner has a high income or assets in their retirement, this could render the couple ineligible in the early stages of their retirement.
“I urge individuals to implement a financial plan as soon as possible to manage debts, savings and super.”
Are you concerned about your superannuation savings? Do you think they will meet your lifestyle expectations? Why not share your thoughts in the comments section below?