How confident are you about retirement?
It’s an intriguing question and if you answered “not very”, you are in very good company.
A State Street Global Advisors Retirement Reality report has shown there is a widespread lack of confidence in Australia’s retirement system and particularly how well it will work in retirement.
Perhaps unsurprisingly, 40% of Australian respondents reported that they had little confidence in their preparedness for their retirement.
Inflation hitting those on low incomes
The least confident were pre-retirees, most likely those who are looking at their annual super statements with some anxiety and are perhaps worried about their job security as well.
Women and those on low income were particularly lacking in confidence, with the current savage bout of inflation being a particularly unsettling influence.
When you combine super balances going backwards, the rising costs of mortgages and rent and a falling ability to save for retirement in the face of other rapidly increasing costs, it is little wonder there is a lot of apprehension out there.
The other major concern could be the difficulty of adjusting to the concept of living off capital rather than income – something other reports have shown an extreme unwillingness by retirees to reduce the size of their nest egg, even if they need to survive on less-than-ideal amounts of income being thrown off from their super investments.
More work to be done on retirement products
According to the report, industry and government “clearly have much work” to undertake in simplifying, explaining and building confidence in Australia’s retirement system.
Some of that work is happening with many super providers working on offering a better range of products as the large Baby Boomer population cohort keeps transitioning towards retirement.
In that vein, the report showed that many Australians are prioritising flexibility in retirement income products, preferring products that provide easy access to savings during early retirement followed by stable income in later years.
Of particular concern was budgeting for those active, early retirement years, with only 21% more concerned about budgeting for later years.
Age pension seen as a backstop
That may be quite logical on two grounds – the age pension may be seen as a backstop for those later years, given that pension eligibility comes later and also because successfully managing finances in early retirement could be seen as leading to a better retirement position in later years.
Interestingly, the report found most Australians would prefer to get their retirement income solution from the super fund that they are already using.
That must be an encouraging sign for the rapidly consolidating super industry which is working steadily at providing a better range of retirement products and financial advice for their members.
The report also showed a strong emphasis on sustainability, with a majority of people supporting exclusions for industries such as tobacco, weapons and gambling.
