Retirement

by May 17, 2024Articles

Retirement

It’s safe to say that the last few years have been a lot for many Australians. No sooner had we emerged from the covid pandemic, and all the issues that came with it, than we entered a period of rapidly rising interest rates which helped trigger a cost of living crisis that we remain in the throes of today.

Unsurprisingly, the events of the last three years were reflected in the findings of our latest Retirement Journey Update, in which we canvas the views of Australians at different stages of their retirement planning journeys.

In the three years since our previous retirement research, several external factors have influenced the attitudes, behaviours, needs and concerns of Australians in all stages of the retirement journey.

Key findings include:

  • In the face of growing financial pressures, more Australians are planning for their retirement. The greatest increase in this activity is amongst pre-retirees.
  • This increase in planning is driving greater positivity overall, however non-planners feel far less confident.
  • Financial needs have increased in importance since 2020, with an emphasis on having a financial plan, being debt free, and having assets that are growing.
  • Pre-retirees are rethinking retirement strategies with over half 59% now expecting to retire between the age of 65 and 70.

The survey is designed to help us as an organisation to understand the impact of these changes and identify new insights to help our clients manage those bumps in the road and make sure your retirement plans remain on track.

Cost of living concerns dominate

The rising cost of living is the key external pressure worrying Australians the most as they prepare for retirement, with 38% of those who responded to our survey citing it as their main area of concern. This was followed by investment performance (12%) and rising healthcare cost (11%).

The current economy has changed how Australians think about their retirement needs, particularly those close to retirement or transitioning into retirement.

49% of pre-retirees (categorised as those aged 45 and over and more than five years from retirement) we surveyed said the economic environment over the last 12 months had caused them to think differently about their retirement needs.

Meanwhile, 46% of those currently transitioning into retirement (categorised as those planning on retiring in the next five years) said the economic conditions of the last 12 months have made them rethink their retirement needs.

Covid highlights deficiencies in retirement home care

Having lived with covid for three years since our last survey, the latest survey demonstrated a shift in thinking towards how retirement villages manage health outbreaks of that nature, with 39% of retirees more critical of their approach, and 29% of those transitioning to retirement saying that they’d changed their retirement plans to factor Covid 19 (or another pandemic) re-emerging.

Greater emphasis on budgeting and saving

In response to the economic environment, Australians are budgeting and cutting back on expenses.

One in two pre-retirees are feeling the need to save more and assume they will need to work longer than planned, while a majority of retirees (70%) are having to budget more and cut back on expenses to combat the cost of living pressures.

Conclusion

Planning can go a long way in not only preparing for retirement, but relieving the stress and pressure that comes with this key life event.

 Often, other financial factors take precedence in our lives, but it’s also important to be mindful of social, personal, and health factors in retirement, particularly for those who are nearing that milestone.

Health complications often catch people by surprise, and you may find yourself no longer able to work, or only able to do so at reduced hours. This can greatly impact the quality of your retirement, so it is vital to at least be prepared in terms of having adequate health cover and savings to get you through.

 

If you’d like to find out more about retirement planning, you may want to consider arranging a time to chat with one of our financial advisers.

References

*Based on KPMG Super Insights 2023 Report as at May 2023 KPMG Super Insights 2023 Report https://assets.kpmg.com/content/dam/kpmg/au/pdf/2023/super-insights-2023-report.pdf

Research Source: MLC Retirement Journey Research – December 2023, FiftyFive5 Research (part of Accenture Song)

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