More of us are lining up to retire, despite shrinking savings

A Roy Morgan survey conducted over calendar 2018, and published in the second quarter of 2019, indicates that the number of people intending to retire within a year had increased by 6% on the previous year’s level, and 11% above the 2017 figure.

This increase is despite the savings levels of these “intenders” being well below the Association of Superannuation Funds of Australia (ASFA) recommended level to be self-funded. These newly retired Australians are therefore likely to be at least partly reliant on the age pension.

The male and female respondents were evenly balanced in Roy Morgan’s “Single Source” survey, which is based on in-depth interviews conducted face-to-face with more than 50,000 taxpayers.

How ready are intending retirees to fund their retirement?
Roy Morgan says it is important to understand how well equipped those intending to retire in the next 12 months are to fund their retirement. Industry Communications Director at Roy Morgan, Norman Morris, says: “A contributing factor to savings falling short of desirable levels has been a reduction in the average age of intending retirees, which has fallen from 62 years 12 months ago to 58 years currently. This obviously has the potential to reduce savings due to a shorter working life.”

The survey found that the average gross wealth (total assets excluding owner-occupied homes) of intending retirees is $299,000, up only 2% over the last two years. The similar survey from 2017 found it was then $293,000. Although the average debt level for this group is currently only $27,000, this reduces their average net wealth to $272,000, which is generally considered to be inadequate for self-funded retirement.

“Additional pressures on retirement decisions are the declining real estate market, share market volatility and superannuation conditions if there is a change of government,” Morris says. “These factors have the potential to delay retirement decisions and encourage people to keep their jobs longer, particularly if the government tightens up the qualifications for the aged pension or other retirement benefits.”

The overall conclusion from this is that intending retirees will be relying on government benefits for some time yet, given the fact that ASFA estimates that an individual would need total retirement savings of $545,000 (a couple $640,000) for a “comfortable retirement”. In annual pension payout terms, this equals $43,601 and $61,522 respectively. By way of comparison, note that at present the government Age Pension base rate (before payment of supplements) is $21,933 for singles and $33,066 for a couple.

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