Retirement has changed forever, survey finds

Retirement is becoming a transition rather than a one-off event.

That’s the assessment of The Future of Global Retirement, a report based on a survey of 6772 adults in Australia, the UK and the US, conducted by financial services company Smart in late 2020.

Survey respondents were asked for their views and attitudes to retirement, their concerns, awareness of options, and preferences in managing their finances in retirement.

It found that people were having difficulties accessing helpful advice to plan their retirement and that the process of retiring was becoming more complicated.

A common trend across the surveyed countries was that people were increasingly expecting to ease into retirement over several years rather than put a firm end date on the calendar.

Read more: Ageing populations an asset: report

In Australia, 55 per cent of respondents said they expected retirement to be an event with several stages, with only 16 per cent of over-55s expecting it to be a one-off event. About one-third of respondents of all age groups expected to work part-time during retirement.

The multi-nation survey also found:

  • The biggest concern in retirement was not being able to afford their desired lifestyle (51 per cent).
  • Healthcare costs (48 per cent) and day-to-day living costs (45 per cent) were major sources of concern.
  • About half of respondents expected their spending in retirement to either remain the same or decrease slightly, and 26 per cent of those who were close to retirement expected their spending to decrease a lot.
  • Just 12 per cent reported not having any concerns around their finances in retirement.
  • 40 per cent of Australians expected to retire between the age of 65 and 69.
  • People generally understood that the retirement age was likely to continue to rise.
  • 21 per cent of 18 to 24 year-olds expected to begin accessing retirement savings between the ages of 70 and 74.
  • About 7 per cent of respondents said that they did not ever expect to retire.

Respondents in Australia, the US and UK were also strong on the need for advice in retirement, citing clear communications, flexibility and guidance as pivotal to a good retirement plan provider.

Most Australians wanted to have control of their retirement decisions, but they also wanted some help with the process. While 29 per cent wanted to manage all their retirement finances themselves, a much larger group (48 per cent) wanted to receive some assistance when making their decisions. Only 11 per cent wanted to fully delegate retirement decision-making to a third party.

Read more: How we fared in Global Retirement Index

Transparency and flexibility were key features of a perceived good retirement plan. Online access (51 per cent) and clear simple communications (52 per cent) were priorities.

The flexibility to change their income when needed (45 per cent) and the ability to receive guidance on how much they could safely spend (44 per cent) were also important.

The survey found that a key challenge faced by savers in defined contribution systems all over the world was converting a savings balance into income during retirement. Most Australians wanted to keep their savings invested and use these to fund an income in retirement, either in the form of interest from investments or as a regular income stream.

Twenty-two per cent said they wanted to receive a guaranteed income or annuity.

Only 8 per cent of respondents said they wanted to withdraw their retirement savings as a lump sum.

Dr David Knox, lead author of the Mercer CFA Institute Global Pension Index, says the world needs to overhaul retirement systems because an increasing number of people don’t work full-time salaried jobs, as was the case when the idea of retirement savings was first conceptualised.

Read more: Work longer, retire later

The rising number of people participating in the gig economy don’t enjoy the retirement fund membership that full-time employed people do, he said.

He also believes it’s time to rethink the concept of retirement age.

“We have an official [Age] Pension age … but there is no retirement age,” he said at a conference in June.

“If you work a little bit longer, not only can you save a little bit more, but you’re shortening your retirement years,” he said.

Are your attitudes and concerns about retirement similar to those reported above? Have you had to make adjustments to any plans because of COVID? When do you (or did you) plan to retire? Share your thoughts in the comments section below.

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Written by Janelle Ward