As clients of a financial planner, according to the inaugural How Australia Retires1report by Vanguard, you’re already well on your way to achieving a high confidence retirement.
Overarchingly, the study found that Australians tend to take one of two journeys towards retirement: low confidence or high confidence. Those who are highly confident have actively prepared for retirement, and those on the low confidence journey are more likely to feel a negative emotion towards retirement, such as worry or anxiety.
High confidence or low confidence
Having surveyed more than 1800 working and retired Australians, over half those surveyed who use a financial adviser also engage with their super fund and are twice as likely to have a detailed plan as those who do not use a financial adviser. Of those who have received professional financial advice, 44% are extremely or very confident in funding their retirement.
Almost two in three working-age Australians have never engaged a financial adviser to help map out their retirement strategy. Of these, 75% report not being confident in being able to fund their retirement. Whilst younger working Australians are generally relatively confident about their retirement, this confidence wanes as they get older, and the longer they go without developing a retirement plan.
When and how much
The study also uncovered significant variance between working-age and already retired Australians on the ideal age to retire and how much income will be required to fund their ideal retirement lifestyle.
On average, those aged between 18-34 hope to retire by age 59.5, and those aged between 35-54 hope to retire by age 61.5, whilst those aged over 55 ideally want or wanted to retire by 64.9 years old. This represented a significant gap in ideal retirement age between younger and older Australians.
When contemplating their desired yearly income during retirement, working-age Australians (yet to retire) expressed they would like to have an income of on average $99,000 per annum (current dollar value). This was significantly higher than those who have already retired, who desire on average $68,000 (current dollar value) as annual income.
The planned advantage
Younger Australians are also more likely to want to disrupt the traditional pathway to retirement by taking some form of extended break from work in the time between their twenties to fifties, with half of Australians under 35 years old expecting to take parental leave. For these younger Australians particularly, having a financial plan in place is paramount. This will help enable them to accumulate enough superannuation and invest for their retirement sufficiently, to achieve their ideals of earlier retirement on higher incomes, despite these anticipated pauses in paid work.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
1 https://www.financialstandard.com.au/news/work-retirement-redefined-vanguard-study-179799518
