The reality of retirement: you'll outlast your savings


The reality of retirement: you'll outlast your savings

New research reveals retirees will outlast savings by more than five years on average; one-time retirement will become history; and the “silver talent pool” will prove to be a double-edged sword for employers, according to research just released.


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New research reveals retirees will outlast savings by more than five years on average; one-time retirement will become history; and the “silver talent pool” will prove to be a double-edged sword for employers, according to research just released.

New research from Mercer reveals a significant gap between Australians’ expectations and the reality of retirement. Most working Australians aged 50-80 expect to retire at age 68. Forty two per cent expect to retire at 70 or older. However, the reality is most Australians retire closer to 60 and only 3% retired aged 70 or older.

According to Mercer’s latest research about one in five Australians aged 50-80 believe they will return to work to manage the impact of longevity risk, the risk of them outlasting their savings or to afford a more comfortable retirement. Only 6% of those already retired have returned to work.

Financial situations

The majority (73%) of Australians approaching retirement believe they will semi-retire, or gradually wind-down into full retirement. In contrast, only 27% of retired Australians actually semi-retired, 67% moved immediately to full retirement. 

Only 36% of Australians retired because they had enough savings and less than one third (28%) of working Aussies aged 50-80 believe they will have enough savings to retire when they want.

It’s likely retirees will outlast their savings by more than five years on average, according to the research.

Expectations disconnected from reality

“Expectations are disconnected to the reality of retirement, which presents a significant risk for individuals and employers. Individuals face longevity risk; employers risk losing the skills, experience and productivity of a valuable silver talent pool if not managed correctly”, said leader of Mercer’s talent business in the Pacific market, Garry Adams.

“With increasing life expectancies, retirement will no longer be a one-time event, as it once was for earlier generations. Continuing to work part-time or re-entering the workforce after a short break will become common – however, there are still a lot of barriers within many companies to do this”, he said.

Two-edged sword for business

“For employers, retaining employees aged 60+ can be a double edged sword. It can boost economic output and allows companies to preserve years of acquired knowledge and valuable experience. But their presence can also be detrimental. Highly compensated senior workers who stay can put a drain on financial resources and block younger employees from possible promotion opportunities.

“Managing an ageing workforce needs to be handled strategically and delicately. When talent management strategies get derailed, younger workers get discouraged, and a company’s costs add up. Yet, on the other hand, older employees will find it frustrating to be encouraged to retire before they’re ready – financially or professionally - after building a lifetime of experience.

“The implications for employers are quite fascinating. How are you going to help retirees re-enter a changing workforce? How are you going to manage people in their second or third career, while engaging people who are in their first career at the same time?”, said Adams.

Employers have the opportunity to maximise employee productivity and engagement while gaining a competitive edge by offering benefits to meet the full spectrum of an employee’s needs, including aged care benefits and flexible schedules. 

More pessimistic

As a nation, we’re becoming pessimistic about our prospects in the lead up to retirement with pre-retirees doubting they’ll have the golden years they previously dreamed about.

Pre-retirees were less positive in their attitude towards affording the lifestyle they desire, with retirees feeling much more able to afford their dreams.

  • Of those retired, 68% can afford to travel on a regular basis or take frequent holidays, compared to only 28% of those approaching retirement.
  • 40% of retirees said they could afford to purchase a new car, but only 24% of those in pre-retirement thought this would be realistic financially.
  • 35% of retirees can afford to provide gifts or financial support for their family, while only 16% of those about to enter retirement believe they will be able to afford this.
  • Frequent travel was by far the biggest dream amongst both retirees (93%) and pre-retirees (83%). Improving health and fitness (65%), buying a new car (55%) and providing support for family (48%) become most important factors after retirement.

Will savings last?

Nearly 50% of pre-retirees are concerned about longevity risk, which is the risk of them outliving their savings. Most don’t have a strategy to combat it.

Women (47%) are more worried about the state of their finances in later life than men (34%). Of those currently retired, 66% said they would simply be careful with how they used their savings and only spend on necessities to help combat long-term risks. 

“People understand we’re living longer, which means we need more money to last the distance, but many of us do not know how we will manage savings through retirement to ensure there’s enough to the very end.

“Although there are many unknowns when it comes to retirement, preparing now will help ensure unforeseen circumstances don’t throw a spanner in the works”, said Adams.

He also emphasised the importance of the superannuation industry, in educating consumers and providing innovative solutions to help during retirement as well as leading up to it.

“We’re beginning to see a wider range of solutions emerge as the superannuation industry shifts its focus from accumulating wealth to providing an income throughout retirement – to the very end – and this is encouraging for Australians”, he said.


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