A record number of Australians are entering retirement and the majority have no idea how they’ll pay for it.
Over half of Australians don’t believe their superannuation fund will provide enough income for a comfortable retirement, forcing them to either work longer or find additional income sources, according to a new report by the Financial Services Council and ING DIRECT.
The FSC / ING DIRECT Your Super Future (2015) report, released in October, found 55 per cent of Australians believe they’ll need to work longer and draw on other assets such as property to fund their retirement. One in nine Australians are counting on an inheritance.
The report found that workers of all ages were open to the idea of working beyond their planned retirement age in order to build enough wealth to pay for retirement, mindful that mental and physical health and access to employment were potential impediments.
It’s clear from the report’s findings that the majority of Australians don’t have any certainty or confidence when it comes to retirement and they need to start planning a lot earlier.
For many Australians, it simply won’t be possible to work well into their 70s nor do they have other assets or a wealthy benefactor to fall back on. Even those fortunate enough to have wealthy relatives can’t bank on an inheritance given Australians are now living longer than ever which increases the risk of potential benefactors exhausting most of their wealth before they die.
This conundrum highlights the importance of saving and planning for retirement early. It also highlights the need and opportunity for financial advisers to help more people prepare for, and transition to, retirement.
A professional adviser can help clients work out how much income they’ll need to meet their retirement needs and goals, and put a plan in place which will maximise the chance of them achieving their goals with minimal risk.
The amount of income people need in retirement is highly individual and depends on factors such as their lifestyle and expectations. The FSC / ING DIRECT Your Super Future (2015) report found around half of workers believe $500,000 is enough to fund a comfortable retirement. A further 39 per cent estimate that they need $1 million or more to achieve their retirement goals.
By comparison, the Association of Superannuation Funds of Australia (ASFA) estimates the lump sum needed to support a comfortable retirement is $640,000 for a couple and $545,000 for a single person, assuming they own their own home and receive a part Age Pension.
An encouraging takeout from the report was that consumers, particularly baby boomers, were increasingly engaged with their superannuation and keen to take control of their wealth. Baby boomers were also the most likely group to have received professional financial advice.
For the large number of baby boomers approaching retirement, seeking professional advice can deliver the certainty and confidence they’re desperately after.
Mark Woolnough is Head of Third Party Distribution at ING DIRECT.
The information is general in nature and does not constitute financial advice. It does not take into account objectives, financial situation or needs and you should consider whether it is appropriate. ING DIRECT is a division of ING Bank (Australia) Limited ABN 24 000 893 292 AFSL 229823, Australian Credit Licence 229823.
