Only 13.7 per cent of pre-retirees confident about retirement future

The majority of superannuation assets may be held by fund members 50 years and over, but that isn’t easing the anxiety of pre-retirees, who are increasingly worried about how they will fund their retirement.

A new report from asset management group Fidelity International, ‘Building better retirement futures’, cited CoreData’s Best Possible Retirement research, which shows that 64.5 per cent of pre-retirees admit to being worried about being able to fund their retirement.

That might be understandable for those with low superannuation balances, but the research also showed that 56.3 per cent of those with superannuation balances of $750,000 to $1 million were still worried about funding their retirement.

According to the report, these worries really only start to recede when an individual has accumulated $1 million or more in their superannuation accounts.

Only 13.7 per cent of pre-retirees believe that they will have adequate financial resources to do everything they want in retirement, while 43.9 per cent of pre-retirees expected a reasonable retirement life, while accepting that some of their wants and desires would go unfulfilled.

Last year, YourLifeChoices surveyed 3000 members for its Financial Security in Retirement survey, which found that people with more savings tended to have more income for retirement and a greater chance of being happy with that income.

That YLC survey also highlighted concerns over losses resulting from the COVID-19 pandemic, with the research showing that people disliked a loss more than twice as much as they liked an equivalent gain.

Fidelity International’s head of retirement, Richard Dinham, said that retirees had good reason to be worried about losses in their retirement savings.

“Retirees still need to take appropriate investment risk to address inflation and longevity risks, but there also needs to be a focus on the impact of market volatility on retirement outcomes,” Mr Dinham said.

“Limiting losses in retirement has a more powerful effect on long-term growth than capturing the full upside of market gains.

“A 10 per cent investment loss requires an 11 per cent gain to simply return to the original point before the loss occurred. A 20 per cent investment loss requires a 25 per cent gain, and so on, to the point where a 50 per cent loss needs a 100 per cent gain to simply return to the original balance.”

Mr Dinham said that while people were aware of the compounding when it came to the positive aspects of saving, few were aware of the negative effects during decumulation.

“The bulk of superannuation assets are now held by fund members aged over 50,” Mr Dinham said.

“As this shift has happened … there is a growing recognition that more thought needs to be given to strategies for drawing down accumulated savings in the form of income over the lifetime of retired investors.”

How much money do you think will be sufficient for a comfortable retirement?

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Written by Ben

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