Baby boomers stagger blindfold into retirement: Tuesday, 22 January 2013 Mark Story
A whopping 86% of Australia’s 5.5 million baby boomers are, in varying degrees, financially under-prepared for retirement, according to research release by industry super heavyweight REST Industry Super today.
Dubbed The Journey Begins, the REST-commissioned white paper (Australia’s largest Superannuation fund)- based on the attitudes of 1,200 Australians approaching retirement – reveals a massive disconnects between what baby boomers expect their retirement to be like, and what reality has in store.
To Damian Hill REST CEO, the biggest surprise within the results is the proportion of baby boomers – around half – who don’t expect to give up anything in retirement, especially given their expected reliance on the age pension.
The survey also reveals a growing reliance on the family home to help close the retirement savings gap, with almost half planning to move house once retired, and more than a quarter expecting to downsize.
Equally surprising, Hill told the Financial Standard is the proportion of unretired over 50s – over a third – identified in the survey as now having
(intergenerational) financial dependents.
“So they’re not only funding their own retirement, they’re also entering retirement with debt and/or funding dependents later in life, be it adult kids or elderly parents, ” said Hill.
“This is making it harder for them to play financial catch-up, and many intend to ease into retirement through part-time work.”
The white paper reveals that only 14 percent of baby boomers feel financially prepared for retirement, 51 percent say they are somewhat prepared financially, while a further 35 percent described themselves’ as completely unprepared.
Despite high expectations about what retirement will bring, the research found a distinctly low level of understanding among baby boomers about how much they will need to comfortably live on.
On average, the amount nominated by respondents required for a comfortable retirement was well below the $56,236 ‘comfortable lifestyle’ budget for a couple and $41,090 budget for single people, as estimated by the Association of Superannuation Funds of Australia (ASFA).
Only 30% of baby boomers surveyed had actually sought formal financial advice, while the remaining 70 percent who hadn’t regularly cited cost, lack of trustworthiness and lack of (perceived) need as the predominant reasons why they had chosen not to seek advice.
Despite superannuation being nominated by the majority of baby boomers surveyed as the most common source of retirement income, less than half the people approaching retirement have a good grasp of how much they have saved (in super) or had taken an active interest in trying to grow this balance.
“Despite the fact that many baby boomers are worried they won’t have enough money to fund their retirement, it’s surprising that so few are starting the planning process early and seem to be in no rush to get any formal advice to help them on their journey,” Hill noted.