Almost one fifth of the workforce aged over 45 say that they are not planning to retire until at least 70. This is in line with the government’s plea for Australians to work longer, including a staged increase to the retirement age up to 67 by 2023.
New research from the Australian Bureau of Statistics (ABS), however, suggests that the government could face some resistance to the higher age. The ‘Retirement and Retirement Intentions’ survey, undertaken in Australia, has shown that Australians are taking early retirement. During the 2012/13 financial year the average age of retirement for people aged over 45 was 53.8 years, with an average retirement age of 59 for men and 50 for women.
These 2012/13 retirement statistics are not in line with the results of the survey into intended retirement age. Almost half those surveyed said they intended to retire between 65 and 69, 25 per cent between 60 and 64 and 17 per cent at 70 years of age or older. That only leaves nine per cent who believe they will retire before 60, a far cry from the 75 per cent of men who retired last financial year before 60, and the 55 per cent of women who retired before 55.
Looking at a larger group of retirees, the ABS has reported that, among men and women whose final job was held in the last 20 years, commonly reported reasons for ceasing work were ‘reached retirement age or eligible to access superannuation or pension’ (44 per cent of men and 30 per cent of women), ‘sickness, injury or disability’ (25 per cent of men and 21 per cent of women) and ‘retrenched, dismissed or no work available’ (10 per cent of both women and men).
The survey comes in the wake of the Productivity Commission suggesting that the pension age be lifted from 67 to 70, an idea which has not been endorsed by the Abbott Government.
So how are these retirees funding themselves? Half of those who intended to retire expected their main source of income to come from superannuation, through annuity or allocated pension. In reality, this was the main source of income for only 25 per cent of men and 10 per cent of women. Instead, 51 per cent of men and 42 per cent of women are being funded by a government pension or allowance. Approximately 44 per cent of women reported their partner’s income as their main source of meeting living costs after retiring.
At the time of the survey there were over 190,000 Australians aged over 45 years who had previously retired, but were either back in the labour force or were planning to find work in the future. The majority of this group were women (114,000), and about 92,000 of those women had already found work. Over 40 per cent of those returning to the work force cited financial need as their reason for going back to work, while 30 per cent stated that they were bored and needed something to do.
Read the full report at the ABS website.
Find out more from the Sydney Morning Herald.
The government wants us to retire at 67, a higher age driven by Australia’s steadily increasing life expectancy. The longer we live, the longer that we need to be able to fund ourselves and that money has to come from somewhere. So why was the average retirement age last financial year as low as 53?
Not only are people retiring at an alarmingly early age, they seem to have very unrealistic expectations of their superannuation. Half of those retiring expected their main source of income to be their superannuation, but for women the real number was closer to 10 per cent. How are they getting it so wrong? How were 40 per cent of women and 25 per cent of men so unaware of the state of their superannuation that they didn’t realise it wouldn’t be enough to fund them?
The Australian Government is warning that, with Australia’s ageing population, funding our retirement income needs is going to become more difficult. This financial problem is only going to be compounded by those who retire early and end up relying on the Age Pension to get by, because they haven’t saved enough while they were working.
I’m not talking about those who retire because they can’t keep working, for medical or other reasons. I’m talking about those who retire early because they don’t want to keep working, without considering whether they can really afford it.
So how can we fix this problem? I’m going to suggest something pretty radical here – education. Bring in a new system whereby prospective retirees must attend a one-day financial literacy seminar on the true costs of retirement. They will have to learn how much it will cost them to retire depending on their age, how much superannuation they really need, and how much of that gap they could close if they worked for another five years (or another 15, in the case of the 25 per cent of women who retired at less than 55 years of age). And they need the certificate from this course in order to access their superannuation or the Age Pension. At least that way we would know that the choice to retire at 53.8 years of age for the majority of our population was an informed one.
What do you think? Is retiring in your early 50s selfish? Or is the problem that too many Australians don’t understand enough about finance to be making good decisions?