Reality tarnishes 'golden years' dream

Reality tarnishes 'golden years' dream

Reality tarnishes ‘golden years’ dream

  • 09 October 2014
  • Australia, Melbourne

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New research reveals Australians expectations of retirement are very different to reality with uncontrollable triggers derailing even the best laid plans for many.

Australians are not as in control of when, why, and how we will retire as we may like, with new research from Mercer revealing 40% of Australians were forced into retirement due to redundancy or illness before they were financially ready.

The latest research from Mercer reveals a significant gap between expectations and the reality of retirement.

According to the research on average working Australians aged 50-80 expect to retire at 68.  Forty two per cent expect to retire at 70 or older.  However, the reality is most Australians retire closer to 60 and only 3% retired aged 70 or older.

Only 36% of Australians retired because they had enough savings and less than one third (28%) of working Aussies aged 50-80 believe they will have enough savings to retire when they want.  Its likely retirees will outlast their savings by more than five years on average, according to the research.

Mercer’s Managing Director and Pacific Market Leader, David Anderson, said, “Our research shows uncontrollable triggers can derail the best laid plans for retirement.  Australians lack longevity defence, which means many of us will simply outlive our savings.

“We’re living longer but retiring earlier than we expect, which means more years to fund in retirement and less working years to save for it.  This disconnect could leave a gaping hole in our hip pockets in our golden years, it just doesn’t add up, we need a better defence”

“Although there are many unknowns when it comes to retirement, preparing now will help ensure unforeseen circumstances don’t throw a spanner in the works”, he said.

As a nation, we’re becoming pessimistic about our prospects in the lead up to retirement with pre-retirees doubting they’ll have the golden years they previously dreamed about. Pre-retirees were less positive in their attitude towards affording the lifestyle they desire, with retirees feeling much more able to afford their dreams.

  • Of those retired, 68% can afford to travel on a regular basis or take frequent holidays, compared to only 25% of those approaching retirement

  • 40% of retirees said they could afford to purchase a new car, but only 24% of those in pre-retirement thought this would be financially realistic

  • 35% of retirees can afford to provide gifts or financial support their family, while only 16% of those about to enter retirement believe they will be able to afford this

  • Frequent travel was by far the biggest dream amongst both retirees (93%) and pre-retirees (83%). Improving health and fitness (65%), buying a new car (55%) and providing support for family (48%) become most important factors after retirement.


Nearly 50% of pre-retirees are currently concerned about longevity risk, which is the risk of them outliving their savings and most don’t have a strategy to combat it.  Women (47%) are more worried about the state of their finances in later life than men (34%). Of those currently retired, 66% said they would simply be careful with how they used their savings and only spend on necessities to help combat long term risks.

The majority (73%) of Australians aged 50-80 years approaching retirement believe they will semi-retire, or gradually wind-down into full retirement, meaning more years of earning an income and saving.  In contrast, only 27% of retired Australians actually semi-retired, 67% moved immediately to full retirement, meaning less time to save and more retired years to fund.

“There is a disconnect between expectations and reality of how long we will have to save for retirement; how we might wind down from the workforce; and how we can manage our money during retirement to ensure there’s enough to the very end”, said David Anderson.

“Half of the population underestimate their life expectancy by more than two years.  On average women underestimate it by three years.  ASFA estimate individuals need to spend $42,433 a year to achieve a comfortable lifestyle, which is about twice the level of the full age pension.  So an underestimation of two years in your savings could leave you relying solely on the age pension and foregoing a comfortable lifestyle.

“Retire at 60 and you will have to fund at least another 25 years on average. Our research into the life expectancies of public sector workers reveals if you’re a white-collar worker there’s a high chance you’ll live much longer than the average and have to fund another 35 years.

“Faced with the question of how to fund 35 years with no income can be a sobering experience.  The message is take control as soon as possible”, Mr Anderson said.

Mr Anderson also emphasised the importance of the superannuation industry, in educating consumers and providing innovative solutions to help during retirement as well as leading up to it.

“We’re beginning to see a wider range of solutions emerging as the industry shifts its focus from accumulating wealth to providing an income throughout retirement – to the very end – and this is encouraging for Australians”, he said.

About the research:

The research findings are based on an online survey of more than 1,500 Australians who were the sole or joint household finance decision makers, aged 50-80 years, and not receiving a full aged pension.  It was conducted for Mercer in July 2014 by market research company Nature.

About Mercer

Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights