Confidence takes a dive as 50% of Aussies say they’re rethinking retirement plans

Man looking sad at his financial position

The cost of living is a hot topic and likely to stay that way for some time. And those heading towards retirement are having to adjust their plans.

That’s the conclusion of the Global Retirement Reality Report, published by State Street Global Advisors and completed in the third quarter of 2023. It involved about 4200 people, including more than 600 Australians, and noted that “many of the measures of confidence appeared to have weakened rather than strengthened” despite a dramatic reversal in markets in 2023.

The survey found that only 20 per cent of Aussies expected to have enough money to retire, while 14 per cent said they couldn’t imagine ever being financially secure, and 46 per cent were not confident they will be financially prepared for retirement.

Compared with survey responses in 2022, all measures were worse, State Street said, with the biggest percentage move seen in the number of people not confident on the timing of their retirement, which went from 40 per cent to 50 per cent.

Why are pre-retirees worried?

In one sense, the results contradict how Australians perhaps should be feeling about retirement. The past 12 months have seen a big improvement in financial performance, which was reflected in strong superannuation results, particularly in the back half of 2023.

So why, then, are Australians seemingly more worried than ever about retirement affordability? That’s a bit of a $64,000 question. (Perhaps more than $64,000 – or maybe less – depending on your current super balance.

Among the top factors cited were inflation and cost of living (73 per cent), followed by mortgage debt or rent, housing costs (38 per cent) and medical expenses (35 per cent).

“These three were selected more often than factors like having spare money for savings, the complexity of the superannuation and pension system and lack of trust in super,” the report says.

“Clearly confidence in retirement is a function of much more than simple investment returns.”

Also, perhaps the improved financial results came through too late for some respondents to adjust their thinking.

Then there is the impact of the pandemic. It’s now more than four years since the outbreak, but COVID is still making its presence felt. An entire Olympic cycle of being affected – directly or indirectly – by the disease, must have an impact on confidence in general.

Australia versus the world

Further analysis of the survey results might be a pointer towards another possible effect of COVID. The report indicates the drop in retirement confidence brings Australians to more or less being on par with other nations.

“Australians have moved from having notably higher expectations than the rest of the world to having similar, or even lower, expectations of [retirement] sustainability,” the report says. “It is unclear whether this shift in attitudes to sustainability is due to recent regulatory action, politics, changes in marketing by product issuers, or other issues rising to the forefront of consciousness.” 

One of those ‘other’ issues could be a societal realisation that Australia is no longer isolated from the world the way it once was. This has been true for some time, of course, thanks to technology and transport advances. But perhaps the manifest impact of COVID has made us more aware of that than ever.

As a result, perhaps even our attitudes and anxieties are no longer isolated from those other nations. And those anxieties include concerns for our future. For those of us over 50, the future means retirement.

On a positive note …

The good news is that it’s quite likely the drop in confidence in being able to afford retirement is misplaced. The improved financial results of late 2023 certainly point to that. Perhaps our good old Aussie confidence will return in 2024. But we may have to wait 12 months, when the next Global Retirement Reality Report is released, to find out.

Has your confidence in being able to retire as planned changed? Why? Let us know via the comments section below.

Also read: Superannuation system failing women and low-income earners, survey finds

Written by Andrew Gigacz

Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.

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