Retirement evolution
.At what age do
you intend to retire - if at all? Do you aim to wind-down slowly to retirement
by working fewer hours or by taking a part-time job? And how do you plan to
finance your retirement?
These are among the crucial questions facing the wave of baby boomers who are
inexorably moving nearer and nearer to what has - at least in the past - been
considered a typical retirement age.
It seems that many Australians are warming to the idea of retiring at an older
age than in the past. And many are easing their way into retirement by
progressively reducing their workload.
The concept of abruptly finishing 40 years or so of full-time work on a Friday
and entering a quarter century or so of retirement from the following Monday
may be fast losing its appeal.
Further, a relatively high proportion of the workforce in their forties and
above expect their superannuation savings to play a big role in financing their
retirement lifestyles.
The findings of the latest Retirement and Retirement Intentions report,
recently published by Australian Bureau of Statistics, reflect this changing
attitude to retirement.
The report found that:
- More than 40 per cent of the full-time workforce
aged 45-plus intend to switch to part-time work before completely
retiring.
- Forty seven per cent of the workforce aged
45-plus plan to retire between ages 65 and 69. And
28 to 37 per cent intend to retire between 60 and 64, while 14 per
cent intend to remain at their desks (or whatever) until at least 70.
- Just over half of those aged more than 45 (and
who intend to retire one day) expect superannuation to provide their main
source of income. And 27 per cent believe that the age pension and other government
allowances will be their main retirement income.
Consider how
these expectations compare with what is actually happening right now.
The average age at retirement of those who retired in the past five years was
61. According to the survey for the ABS report, the biggest source of
retirement income is the age pension and other government allowances (53 per
cent of current retirees) followed by superannuation (27 per cent.)
Interestingly, 44 per cent of women named their partners' income as their main
income.
Many factors are probably at play here. Certainly, reliance on super savings
will inevitably rise as the compulsory contribution system matures. However,
many retirees are at risk of being overly optimistic about how far their super
will really stretch in retirement.
And by the way, 13 per cent of the workforce aged over 45 does not want to ever
retire - a sentiment that must have been reinforced by the latest bout of high
volatility in the market.
Perhaps a key point is to plan carefully for retirement and to be realistic
about how much money you will need to finance your desired standard of living
in retirement.
By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
21st December 2011
