Retirees reveal what they wish they knew about retirement in new TAL research

Research from Australian life insurer TAL, What I Wish I Knew About Retirement, reveals the expectations of Australians approaching retirement versus the lived experience of retirees.

The survey of 1000 Australians aged 55 and older highlights the important role of superannuation funds in providing retirement education and tools to members, with 51% of pre-retirees and 39% of retirees looking to their fund for guidance around their retirement decisions.

Ashton Jones, TAL General Manager of Growth, Retirement & Wealth Partnerships, said that by understanding the expectations and concerns of pre-retirees and the realities of those living in retirement, superannuation funds had an opportunity to help more Australians enjoy a fulfilling and financially secure retirement.

"Our research shows that while three-quarters of pre-retirees are engaged or highly engaged with their finances, one in three don't know what they will do with their super when they retire. Super funds can play a pivotal role in helping these members attain the retirement lifestyle they want and deserve,” said Jones.

The research highlights several areas where superannuation funds could further support members approaching retirement. These include providing financial tools and education to help with retirement decisions; guidance navigating the Age Pension and aged care options; assistance optimising drawdown rates; providing lifetime income products that give members the confidence to spend their retirement savings; and guided pathways to help members choose financial products that are right for them.

Taking steps to financially prepare is key to retirement confidence

The research shows there is work to be done to ensure Australians nearing retirement feel financially ready with 34% feeling unprepared. 32% of pre-retirees have yet to take steps to prepare for life after work and 38% are concerned they will not have sufficient funds to either cover basic costs or maintain a comfortable retirement lifestyle.

“Pre-retirees want more information about how much super they need to retire, how much their super balance is likely to provide for them, and how they can improve their retirement outcomes,” said Mr Jones.

While 39% of retirees had taken no action to financially prepare for retirement, those who topped up their investments, particularly their superannuation, felt the most confident about their finances.

At the point of retirement, 34% of retirees had converted their superannuation to a regular income stream or pension account, while 27% had kept most of their savings in their accumulation account, 15% had withdrawn all or most of it as a lump sum, and just 7% had moved a portion to a lifetime income product.

In retrospect, retirees who had taken their savings as a lump sum were least satisfied with their choice, with only 56% saying they were now happy or very happy with their decision, compared to 87% of those who had either moved their superannuation to a pension account or lifetime income stream.

“Understanding why retirees had made financial choices, and what they’d do differently in hindsight, indicates that pre-retirees could benefit from specific guidance when making these important decisions,” said Mr Jones.

Many Australians retire earlier and will live longer than they expected

Australians commonly expect to retire between the ages of 65 and 69, but in reality, many stop working earlier, with six in 10 retiring before this age (59%). Further, while most pre-retirees intend to retire gradually (53%), this was the case for only 30% of retirees, with over half (52%) retiring immediately upon ceasing full-time work. For retirees whose retirement date was unplanned, the main reasons for leaving the workforce were redundancy, sickness and unemployment.

"When retirement arrives sooner than expected, it can derail a person’s ability to prepare as much as they’d like to. Some common themes that emerged for retirees were that many wish they’d put more into superannuation when they had the chance, or that they’d started salary sacrificing earlier,” said Mr Jones.

Significantly, one-third of retirees now expect to live longer than they anticipated when they first retired. This is reflected in the finding that retirees felt most confident about their finances in early retirement, with older respondents reporting lower levels of financial health¹. This led to financial stress among 32% of retirees over age 80 as they draw down their retirement savings, highlighting the benefits of retirement products that pay an income for life.

Declining physical health and cognitive decline are top concerns

Declining physical health and reduced mobility are the key concerns for retirees. Many also worry about their mental health and cognitive decline over time.

In particular, they’re worried about their ability to make financial decisions in the future. Most retirees feel capable of making decisions about their retirement right now, with only 10% reporting low confidence levels. But when asked about their ability to make decisions 20 years from now, 42% say they’re not confident.

This suggests that retirees would feel more secure in making financial decisions early in retirement that will set them up for the future, in case they experience cognitive decline later on.

“With 2.5 million Australians approaching retirement in the next decade, it is essential that we do everything to ensure they are well equipped for the realities of life after work,” Jones said.

“By offering members retirement income solutions that provide the certainty of an income for life, regardless of how long they live, superannuation funds can help more members move confidently through the different stages of their retirement.”

TAL has published a whitepaper based on the research for superannuation funds, What I Wish I Knew: Insights into the Financial Needs of Australian Retirees.