A survey conducted by investment group Vanguard has revealed an increasing number of Aussies believe they will be renting in retirement, a potential threat to the sustainability of the entire retirement system.
The number of older Australians who believe they will still be paying off a mortgage in retirement is growing, according to Vanguard’s latest How Australia Retires survey.
Daniel Shrimski, managing director of Vanguard Australia says 30 per cent of currently working Australians – or about one in five – aren’t confident they won’t be renting in retirement and that it’s having a noticeable negative effect on retirement planning.
“This is a bit of a sleeper issue when it comes to retirement. We tend to presume we’ll be homeowners and mortgage free – but having unresolved debt or needing to drawdown on savings to pay rent is likely to be a big financial burden for many, especially if full-time paid work is no longer an option,” he says.
“This is why it’s so important that a robust superannuation balance is part of a ‘whole of wealth’ retirement plan, so Australians can have confidence and security in retirement.”
A fear of running out of money in retirement is nothing new, but the current economic climate has pre-retirees even more worried. The survey showed most people still working now believe they will need to find $25,000 per year extra by the time they retire to sufficiently cover their expenses.
The survey also showed Aussies are worried that what they have saved won’t last until the end of their lives – four out of five indicated they were either ‘somewhat concerned’ or ‘very concerned’ about running out of money and half of retirees said they don’t really know how much they can spend each year if they don’t want to run out.
No plan for retirement
Mr Shrimski says it shows a shocking lack of forward planning for retirement and knowledge about the role superannuation plays.
“We’ve all heard about FOMO – Fear of Missing Out – now there’s FORO – Fear of Running Out,” Shrimski says.
“This also isn’t helped when around two-thirds of all Australians (67 per cent) haven’t thought about or don’t know what age they’ll need to plan for in retirement.
Almost 40 per cent of Australians have no clear plan for retirement and around half said they don’t know what they’re paying in superannuation fees. One-third said they either didn’t know or when unsure of Age Pension eligibility rules.
Role of financial planners
With so few actually making a plan, it’s perhaps not surprising that very few survey respondents said they had engaged the services of a financial planner.
“When it comes to retirement confidence, the research continues to show that planning and having access to a financial adviser gives Australians a much better chance at a successful retirement,” Mr Shrimski says.
But rather than do that, it seems a good portion (42 per cent) of Aussies are getting their retirement and financial planning information from free online sources such as Google.
However, according to the survey, the most popular source of retirement information and guidance overall is free online sources, such as Google (42 per cent).
“This is very concerning because we know quality financial advice can make a real difference to the retirement outcomes and experience for Australians,” Mr Shrimski says.
“The more Australians know, the better they can plan for the lifestyle they envision, and the more confident they will feel.”
Do you think you’ll still be renting in retirement? Did you speak to a financial planner before you finished work? Let us know in the comments section below.
