Work longer, retire later: Australians anticipate a tough future

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Australians are less confident about retirement, and many expect to work longer because of the COVID-19 pandemic.

The Colonial First State (CFS) Retirement Realities survey of 1000 people in June found that 45 per cent of Australians do not feel financially confident about retiring. And 23 per cent of Australians aged 30 to 65 say they will delay retirement because of the coronavirus.

“It has been a big wake-up call for those Australians in their prime working age regarding their employment, savings, expenses, investments and super, and many have been forced to get a better grasp of their finances,” says Colonial First State general manager product Kelly Power.

“Younger Australians who still have time before retirement are feeling more anxious about retiring than their older counterparts because they’re still building up their savings pool while the reality of retirement costs start sinking in.”

While 34 per cent of those surveyed said they had saved less than usual because of a loss of income and/or an increase in bills, half said they planned to reduce spending and budget better.

“The good news is there are some simple ways to rebuild your nest egg and boost your retirement income, and we’re already seeing some Australians starting to tackle this. Our research found that many of us are willing to make sacrifices to get back on track, reducing spending and keeping a closer eye on our budgets, which is a positive sign,” Ms Power said.

The research also found that younger Australians (aged 35 to 49) are feeling more underprepared for their retirement than their baby boomer (aged over 55) counterparts.

And women have been most affected by coronavirus chaos.

A third of women do not feel confident about retiring compared to men (33 per cent versus 25 per cent) as they have been able to save less during the pandemic. However, women are more willing to reduce spending after the pandemic compared to men (53 per cent versus 46 per cent).

The research found that a third of women (32 per cent) surveyed did not have an investment portfolio outside of super, compared to just 17 per cent of men, potentially leaving them with less income after retirement.

Ms Power said: “The gender gap in the Australian superannuation system is a real issue that sees women financially disadvantaged in retirement. It was an issue before the current crisis, and it will be an even bigger problem when we emerge from the recession.

“As an industry, this is something that is concerning for us and we need to do everything we can to support women impacted by coronavirus, help them protect their wealth, and rebuild as the economy recovers.

“Women would benefit from further initiatives and incentives to make additional contributions to super to ensure they have adequate retirement savings. Specific measures include mandating super contributions on paid parental leave and removing the $450 per month threshold for superannuation to be paid. This will also improve the retirement savings adequacy for low-income earners and casual participants in the workforce who often hold multiple jobs, many of whom are women.”

An April survey of more than 3000 YourLifeChoices members found that the No.1 financial concern for retirees now is losing their savings as share markets fall. Comparatively, in May 2019, market falls was the fifth most common concern.

“The sharp increase in concerns over share market losses is reflective of the popularity of shares as an investment and source of retirement income,” said a survey analysis. “Share ownership increases with wealth, and most of the people who responded, and have more than $300,000 in total savings, reported holding shares.”

At the other end of the scale of financial planning were the 26 per cent of CFS survey respondents who didn’t know what their super balance was or what fund it was in.

“We know that there have been a lot of Australians needing to access their super early as a way of surviving income loss, but either way super has become a more important topic of discussion in Australian households,” Ms Power said.

“Being actively engaged with your super is critical given a quarter of Australians aged 30-65 years old don’t have an investment portfolio outside of super.

“We want more Australians to engage with their super and take positive action to make their personal retirement goals come true.”

CFS tips to build your retirement savings:

Know your number
Planning starts with understanding how much you will need to lead a comfortable lifestyle in retirement. Use free tools such as ASIC’s MoneySmart retirement planner calculator to know where your finances are at.

Make small top-ups
Once you are back at work, making a small super top up of $10 a week could make a big difference to how much money you have in retirement. Just beware there are caps or limits to how much can be contributed to super each year and tax rules apply.

Understand what eligibility you might have for government support
Check whether you’re eligible for the low-income super tax offset (LISTO) if your finances have changed. LISTO is a government super payment of up to $500 per year to offset tax on concessional contributions and help low income earners save for retirement. For people who have earned less than $37,000 it happens automatically when they lodge their tax return, if the super fund has a copy of the super member’s tax file number. Low to middle income earners are eligible for an extra $500 from the government via super co-contribution, if they meet criteria, including making an after-tax contribution.

Leonie di Lorenzo of offers superannuation advice for retirees:

Don’t try to time the market
In the hunt for yield, it can be tempting to try and time the market, but this is a risky strategy as no one knows for certain the best time to buy or sell.

Your portfolio can be designed with ‘shock absorbers’ to help you ride out volatility, so that you are not feeling constantly under pressure to act each time the market shifts substantially.

Stress test your portfolio
When building a portfolio, investors shouldn’t just think about returns. A major consideration is the ability for their portfolio to withstand unexpected impacts. 

To be able to comfortably withstand and ride out market volatility, it’s important to understand how your superannuation portfolio will perform during times of uncertainty. The key to understanding this is first knowing what your superannuation is invested in.

Whether you’re in a retail, industry, or self-managed superannuation fund, take the time to check your asset mix. A diversified portfolio provides the greatest protection in times of extreme volatility.

Take advantage of government stimulus
When an individual is receiving a pension from their superannuation fund, they are required to take a minimum payment each financial year. This starts at 4 per cent of their superannuation balance for those under 65 and increases steadily to 14 per cent by the time an individual reaches 95 years of age.

One of the measures introduced by the government to alleviate the pressure on retirees’ pension balances, was a temporary halving of the pension minimums for the 2019-20 and 2020-21 financial years.

This measure creates an opportunity for those retirees who may not need the full amount of their pension payment.

While many rely on this income to fund their day-to-day living expenses, for those who don’t, there is the option to reduce the minimum pension payment by up to half.

Has the pandemic changed how you feel about retirement? What have you done to adjust your outlook? Do you have new timelines?

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Written by Will Brodie


Total Comments: 8
  1. 0

    In today’s employment environment, especially with the Covid-19 conditions, it will be harder and harder for seniors to be working. Soon, the only seniors working will be those who are still maintaining their job, not getting a job.
    Only last night I saw a show on TV where a guy left his non family-friendly job, in his mid 40’s for paternity leave, and he talked about how hard it will be to get back into the workforce due to employer age discrimination.
    This is ONE time I am glad I am not working and on the pension. Actually saving a bit of money as many of my little pleasures have been curtailed or stopped.
    I just wish the Government would abolish the discrimination of not allowing non-working seniors, the ability to add to their super. What is the difference, whether you work or not, in adding to super?

    • 0

      Older&wiser, I agree. The little loophole (put in for politicians) which allows us to pay all earnings once we retire, into our super and have it treated with a preferential tax rate is nice, but unlike politicians, we can only use this loophole for a few years. Because politicians can retire earlier, they can shovel money into this beaut deal for years. Money goes in at very low tax rate, you pay yourself an annual tax-free income and life is grand.

  2. 0

    An issue not often addressed is the financial market has a vested interest in over stating how much money is required to enjoy a reasonable retirement.
    Once retired many people expect to be living high on the hog with overseas holidays every year and dining out at least once a week.
    That is fine if you have a massive superannuation amount or been able to accumulate a significant amount of investments.
    The average person is not in that position but it is still possible to enjoy your retirement without all that money.
    The thought of leaving a considerable sum to your children or grandchildren should not be a criteria controlling your retirement.

    • 0

      Yes – they like to quote the 1 or 2 million dollars is needed but when you look at the figures it never includes the pension and usually allows for the capital to stay there until you die, hence passing it on to the kids. They are just ridiculous numbers and not real world at all.

  3. 0

    “Has the pandemic changed how you feel about retirement? What have you done to adjust your outlook? Do you have new timelines?”

    We have been retired for some time so the questions don’t really relate to our current situation. We rely on our super fund to invest funds wisely and as has been pointed out many times, it’s unwise to change the balance of funds when there has been a downturn but to ride things out.

    I would like to support the advice to people still working to top up their super fund with salary sacrifice and I would suggest that people should check how much they lose from their wages when salary sacrificing. If an amount of $50 is salary sacrificed, the pay doesn’t reduce by that amount as there is a tax deduction alteration. I also agree that retirees should be allowed to add to their super if they are able.

    This forum has had discussions about how much is needed to retire comfortably and even though each of us has different needs and circumstances, the amounts held in super in excess of $1M trumpeted by so called experts is not needed. For a couple who are home owners an amount of about $300,000 in super with minimal other assets can receive a full age pension and the combination of that and super will give about $1,000 pw. To compare that with someone working, that’s almost the equivalent of about $70,000pa which is much higher than the basic wage and a little lower than the average wage. Add to that all of the rebates allowed to age pensioners and most may be able to live a comfortable retirement.

  4. 0

    At this Pandemic Time we are now in, Just Having A Job would be amazing. As Stated The Older You are and not working/job keeper/seeker etc less likely to be Employed/Reemployed.
    To stay in the Work Force beyond 60 years of age will be challenging let alone OAP age.
    The super raid can help for now, this is just the beginning with no End Date thinkable at this time. Restrictions/Lock downs essential workers a Strange time for this topic.

  5. 0

    Timing the market is the most important thing to remember. Buy when market falls and sell when market is high.



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