Retirement lifestyle concerns

Australians pessimistic about retirement lifestyle

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The majority of Australians aged 45 and up (53.1%) believe that they will not have an adequate super balance or income to maintain their desired lifestyle in retirement, according to new research from CoreData.

CoreData’s 2016 Post Retirement Report found that pre-retirees expect to need an average of $1,224 a week (up $100 from 2015 and $209 from 2014) and a super balance of $804,559 to maintain their desired lifestyle.

In a bid to manage the risk they will outlive their savings and combat rising costs of living, 81.2% of pre-retirees plan to keep working in some capacity upon retiring.

The report found that awareness and understanding of the retirement solutions available were low among pre-retirees, with only 31.9% stating they have a good understanding of what an annuity can offer and only 27.3% claimed they were likely to purchase one in retirement.

Kristen Turnbull, head of WA at CoreData, said that the average superannuation balances at retirement of $292,500 for men and $138,150 for women fall well short of the $8000,000 balance the average pre-retiree expects they’ll need.

The reality is that retirees are either going to have to drastically alter their expectations for retirement or start making some serious financial and lifestyle sacrifices now if they have any hope of reaching their financial goals in retirement

Digital engagement emerged as a key way superannuation funds can educate over 45s on their retirement options, with 54.8% of pre and post-retirees stating they would like their main fund to make information available on the funds’ website.

[via Financial Standard]

Retirement

More Australians intend to retire later

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The proportion of Australians intending to retire beyond age 65 is increasing rapidly.

According to a research note just released by the Australian Bureau of Statistics (ABS), a survey conducted in 2015 showed 71% of people said they intended to retire at the age of 65 years over, up from 66% in the previous corresponding survey conducted in 2013 which in turn was up from 48% in 2005.

The proportion of people who intend working up to age 70 is up four-fold.

“The survey found that 23% of people aged 45 years and over are intending to retire at the age of 70 years or over compared with only 8% in 2004-05” said Jennifer Humphrys from the ABS.

The average intended retirement age is 65 years; 66 years for men and 65 years for women notes the ABS.

The majority of Australians intend to retire between 65-69 years, but the results show that now over a quarter of males 45 years and over plan to work past 70 years.

The survey commenced a few months after the government last year announced changes to the current qualification age for the Age Pension, said the ABS.

For those in the labour force who intended to retire, the most common factors influencing their decision were ‘financial security’ (40% for men and 35% for women) and ‘personal  health or physical abilities’ (23% for both men and women).

In encouraging news for the superannuation sector, just over half (53%) reported their main expected source of personal income at retirement as ‘superannuation/annuity/allocated pension’.

“While 47% of people aged 45 years and over who had retired reported a ‘government pension or allowance’ as their main source of income at retirement, only 27% of people aged 45 years and over who were intending to retire indicated that this would be their main expected source of income at retirement”

The survey also highlighted the importance of partner’s income as one of the main expected source of funds for meeting living costs at retirement.

[via the Financial Standard]

Economic growth to slow significantly

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E071D108048541A4A4924248176C9FF9.ashxThe Intergenerational Report (IGR) has projected that the growth rate of the economy over the next 40 years will be significantly lower than the last 40.

In introducing the report Treasurer Joe Hockey said:

“it is fantastic that Australians are living longer and healthier lives but we need to address these demographic changes. If we don’t do something, we risk reducing our available workforce, impacting negatively on growth and prosperity, and our income will come under increasing pressure.”

Released today, the report projected average economic growth of 2.8% per annum over the next 40 years with annual growth per person of 1.5%. This would see the annual income of the average Australian rise from $66,400 today to $117,300 by 2055.

This growth rate is expected to be slower than the 3.15% per annum, or 1.7% per person, achieved over the past 40 years due to an ageing population and gradual decline in the participation rate.

“To achieve this level of growth going forward, we must take steps to build jobs and opportunity. We also need to make choices today to prepare for the future”, the report said.

“We have a responsibility to plan and budget not only for today, but that tomorrow.  But we are currently living beyond our means.”

The Australian government’s spending over $110 million per day more than it collects and his borrowing to meet the shortfall resulting in $40 million being spent per day on interest repayments.

However, the report said that if the government’s policies are fully implemented it projects the underlying ash balance to improve to a surplus of 1.4% of GDP in 2039 – 40, and then moderate to a surplus of around 0.5% of GDP in 2054 – 55. Net debt is projected to be fully paid off by around 2031 – 32.

The government is open to alternative measures to bring the budget back to surplus. The policies proposed by the government, if fully implemented, will improve Australia’s capacity to respond to the challenges and opportunities outlined in the Intergenerational Report.

Male life expectancy is projected to increase from 91.5 years today  to 95.1 years in 2055.  The number of Australians aged 65 and over is projected to more than double by 2055 compared with today.

The number of people aged between 15 and 64 for every person aged 65 and over has fallen from 7.3 people in 1975 to an estimated 4.5 people today. By 2055, this is projected to nearly halve again to 2.7 people.

 

 — Mark Smith via the FINANCIAL STANDARD