Retirees better prepared for retirement than ever – or are they?

It’s the time of the year when we all start looking for ways to change or improve our lives. Most people take the ‘new’ in new year as a reason, or excuse, to do more with their lives and aim for a better future.

For those planning retirement in the new year or in the next couple of years, the future looks rosier than ever, depending how you look at it.

A new Investment Trends report shows that more Australians feel more prepared for retirement than in 2020, but concern regarding retirement income regulations has doubled.

YourLifeChoices data from the Older Australian Insights 2021 survey shows that 85 per cent of fully retired respondents rate themselves as ‘confident’ and around half (48 per cent) think they will have enough money to last their lifetime.

More than three-quarters (76 per cent) say the pandemic has had no effect on their retirement. Almost nine in 10 (88 per cent) said it had no effect on their retirement planning. Although, just under 9 per cent said it had created uncertainty about their retirement and 2 per cent were forced into early retirement.

Just 31 per cent of pre-retirees think they’ll have enough money for life, and yet fewer than seven in 10 (69 per cent) say the pandemic has not affected their retirement planning. For almost two in 10 (18.5 per cent), the pandemic created uncertainty about their retirement and almost 9 per cent said it delayed their retirement.

Read: COVID shock means one in five will delay retirement: study

It would seem that those already in retirement feel as if they’ll fare better in a post-COVD world, while those who have yet to retire are a little less optimistic and possibly underprepared.

And yet, the Investment Trends 2021 Retirement Income Report Research revealed that two-thirds of Australians aged over 40 feel prepared for retirement, with the number of pre-retirees who were more concerned about money during the pandemic returning to pre-pandemic levels of concern.

The report specifically evaluates whether attitudes towards retirement have changed as a result of the impact of the coronavirus. It found 16 per cent of pre-retirees feel ‘very well prepared’ for retirement, up from 10 per cent in 2020, while another 45 per cent feel ‘somewhat prepared’, up from 36 per cent last year.

Investment Trends associate research director Kurt Mayell said pre-retirees now expect their savings to last seven years longer than they did a year ago.

“For the first time in five years, one in two retirees expects their retirement savings will outlast their years in retirement. As of September 2021, pre-retirees expect their savings to last on average 22 years, seven years longer than only a year ago,” said Mr Mayell.

The pandemic may have exposed a sense of mortality among older Australians, with the proportion of those who inquired about estate planning in the previous 12 months increasing to 50 per cent compared to 31 per cent in 2020.

Read: Nothing like a pandemic to put pressure on estate planning

“With an improved retirement outlook, more Australians say they would eventually like to leave the balance of their super to their heirs, welcoming increased estate planning advice and content,” said Mr Mayell.

Those without an estate plan cited a lack of information on subjects such as superannuation death benefits, tax implications and wealth preservation for their reticence.

Mr Mayell said many older Australians are unaware of the many retirement income products in the market.

“There are enormous opportunities for super funds to provide clarity about the pension products and strategies they offer, suggesting the developing retirement income covenant seems to be taking shape at just the right time,” he said.

The report also found the biggest concerns around retirement and retirement income.

Illness is the primary concern for 56 per cent of respondents, but the research also revealed concerns around superannuation regulatory changes has more than doubled since 2020 to 41 per cent.

“We are seeing the prospect of regulatory changes impacting peace of mind for many Australians either heading towards or in retirement,” said Mr Mayell.

The gap between expected retirement income and ideal income has decreased by 27 per cent as pre-retiree respondents said an average $4500 a month would suffice for a comfortable retirement but expect to receive $4100.

Read: The ‘gap’ that is hurting too many retirements

“For the first time in five years, one in two retirees expects their retirement savings will outlast their years in retirement.

According to the latest YourLifeChoices Retirement Affordability Index – Australia’s most accurate cost of living retirement table compiled in association with The Australia Institute – a well-off couple (self-funded retirees) should budget to spend $78,833 a year, or $6569 per month.

Constrained couples (homeowners on a part Age Pension) should budget $45,495 per year, or $3791 per month and cash-strapped couples (renters on an Age Pension) should budget $38,184 per year or $3182 per month.

Well-off singles would spend $45,009 ($3751 p/m), constrained singles $25,069 ($2089 p/m) and cash-strapped singles $23,994 ($2000 p/m).

Do you feel better prepared for retirement? Or are you already retired? If so, how do you feel about your prospects? Why not share your thoughts in the comments section below?

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Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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