Boomers ‘financially unprepared’

Baby boomers feel financially unprepared for retirement, as alarming new figures show 86% are not ready to ‘clock off’.

The REST Industry Super, one of Australia’s largest industry super funds by membership, commissioned the paper titled The Journey Begins, which reveals one third of Australian baby boomers are financially unprepared for retirement.

The paper highlights:

• 0% have not sought formal financial advice about their retirement;
• a quarter “are just closing their eyes and hoping for the best” on funding retirement;
• just 14% feel financially prepared for retirement; and
• a further 51% say they are somewhat prepared financially and a further 35% saying they are completely unprepared.

The paper captures the attitudes of 1,200 Australians approaching retirement and finds out more about their financial situation, plans and expectations for the road ahead.

REST chief executive, Damian Hill, said: “What we found is some sizeable gaps between what baby boomers are envisaging for their retirement and what the reality will be.

“In order to avoid disappointment for many, the financial services sector will need to work with government to educate and encourage people to plan and prepare far earlier.”

The research found that despite high expectations about what retirement will bring, there is a distinctly low level of understanding among baby boomers about how much they will require each year to fund a comfortable retirement lifestyle.

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.

The white paper found that superannuation was nominated as the most common source of retirement income for the majority of surveyed baby boomers. Despite this, less than half the people approaching retirement have a good grasp of how much they have saved in super or take an active interest in trying to grow this balance.

Other key findings of the white paper included:

• many intend to ease into retirement through part-time work – indicating that employers will be able to retain skills and corporate knowledge for longer, but will need to be flexible to take full advantage;
• a third of unretired over 50s have financial dependants whose needs will have to be taken into account when deciding when or whether to retire;
• almost half of respondents are planning on moving house once they retire, with more than a quarter planning on downsizing;
• the majority of people surveyed are looking forward to putting their feet up in retirement, with 62% saying their retirement would be about relaxing and enjoying the fruits of their labour, with more time to enjoy life, travel and recreation activities;
• 40% have some reservations about finishing their work journey, with 16% of these saying they are not looking forward to retiring at all.

“Education needs to be targeted and delivered in such a way that all retirees, whatever their retirement plans, understand the importance of early planning and seeking advice for a massive life change that will no doubt impact them significantly both financially and psychologically,” Mr Hill said.

View the REST Industry Super The Journey Begins white paper.