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Australians choose to retire later through fear

New research by the Association of Superannuation Funds of Australia (ASFA) has revealed that a ‘substantial minority’ of Australians are choosing to remain in the workforce beyond their retirement age.

According to a survey of 1,500 Australian adults, who are representative of the broader population, 33 per cent of those aged 65 and 69 and 8 per cent of those aged 70 and over are either employed or actively seeking employment. Notably, of those aged 65 and still working, the report found that one in four do so for non-financial reasons.

The report also found that around 14 per cent of those who continue to work beyond the retirement age do so for financial reasons – the biggest one being they don’t believe they have enough to retire. And the fear is, if they retire and get it wrong, then they will not be able to return to the workforce. Also more than 20 per cent of workers retiring prior to age 60, were doing so not through their own choice.

Which brings me to the issue of ‘having choice’. Many people delay retirement and remain in the workforce to maintain social interactions and connections. There is a rising incidence of people retiring earlier than they would choose, due to ill health or to care for other family members. The issue of retiring earlier to assist others disproportionately impacts women.

Those who continue to work for financial reasons are likely struggling with a fear of not having enough to retire, regardless of whether this is the case or not. In many cases, they don’t really know and don’t know how to go about finding out.

We recently dealt with a client who had over a million dollars and would not qualify for an age pension. Common concerns were ‘I don’t know if I can retire or not. Are we going to have enough? What about aged care in the future? What about medical bills? What about the cost of living?’ Only when we could demonstrate, using financial modelling with very conservative assumptions, was there sufficient ‘peace of mind’ to feel comfortable in making the decision to retire.

The days of working to defined retirement age and then putting your feet up are long gone. Everyone’s situation is different and specific to them. Using online calculators or feeling that a financial product might be the solution is not a real or sustainable solution.

We have found that the pathway to financial security and a sustainable solution is to commence the discussions and the thinking early. Understanding how and where you want to live and what brings meaning to you is critical in those discussions There is undoubtedly a period of reflection that should and must take place.

While we like to start these discussions, five years out, if possible, two years is often what we work with and we receive a number of enquiries from people who are looking to retire very shortly.

The longer the lead time, the more options and levers we have to pull. There is always a lot of gravity in these discussions, so having ample time for discussion and reflection will maximise the probability of transitioning to a successful retirement.

 

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