1 in 2 Australian retirees regret not saving more

If they could start their working life again, 46% of retirees said they would make extra super contributions, start saving earlier, or save more consistently, according to new research from Investment Trends.

Based on an online survey of 964 retirees and pre-retirees late last year, the Investment Trends 2010 Retirement Incomes Report revealed a considerable mismatch between Australians’ expectations before retirement and the reality of life for many retirees.

Key findings include:

• Before retirement, Australians expect on average that they will need $56,000 a year to lead the retirement lifestyle they are looking for. But retirees spend an average of just $39,000 a year once they retire, with spending declining to an average of $32,000 a year after 10 years in retirement.

• Those in their 40s and 50 underestimate their life expectancy, and thus the amount of retirement savings they will need. However, retirees currently in their 80s expect to live to 95 on average, with only 1 in 8 saying they are in poor health. That gives them an average of 31 years of retirement.

Tim Cobb, chief operating officer, Investment Trends, said many Australians seem to be unprepared for retirement, and have unrealistic expectations for their retirement savings.

“Among those yet to retire, around 1 in 4 expect to earn 10% a year on their retirement savings, considerably more than recent returns,” he said. “Similarly, almost half expect to receive the Age Pension, whereas only 31% of current retirees are in fact entitled to a full or part-pension,” Cobb said.

“At the same time, the report shows that retirees adjust rapidly to their reduced incomes, with actual spending amongst retirees considerably lower than the amounts that those in the workforce anticipate they will need.

“While around 47% say that living in retirement is cheaper than expected, it also seems likely that many retirees are adjusting their lifestyle to fit their means,” said Cobb. “More than half have been negatively affected by the GFC, with 35% saying that they have somewhat less income than before, and 14% saying that they have substantially less income.”

Asked what they thought was most important in a retirement income product, both retirees and pre-retirees preferred transparency and stability to high returns. The 5 features they rated most highly were tax effectiveness (rated as essential, very important or important by 91% of participants); easy access to money (87%); easy to understand (86%); protection against market falls (77%), and stable returns (86%).

The above article has been sourced from Financial Planning Magazine.

Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.