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What’s the plan after work?

The Age – Money

Date September 22, 2013

By John Collett

A retiree study shows many were ill-prepared and plenty regret opting for semi-retirement when they did.

Two fifths of all Australian retirees think they did not prepare properly for retirement.

Four in 10 Australian retirees have told an international survey that they did not prepare adequately, or at all, for a comfortable retirement. The report also reveals Australian retirees were the hardest hit by the global financial crisis among the 15 countries surveyed.

The 16,000-person global study into retirement by HSBC shows that, among the countries examined, the financial crisis caused the biggest drop in incomes for Australians leaving work. The chief culprit is the high exposure of superannuation funds to shares.

Some superannuation fund default investment options have half of members’ money invested in shares. The Australian Securities and Investments Commission says on its MoneySmart website that just under two-thirds of older Australians rely on a government pension or allowance as their main source of personal income at retirement. Only 7 per cent of non-retirees say they have received an inheritance, the study shows.

“Australians have felt the GFC acutely and for a prolonged period because of the strong links between our pension and superannuation systems and equity markets, which saw more than 50 per cent falls following the crisis,” says Graham Heunis, HSBC Australia head of retail banking and wealth management. Those people highly exposed to equity markets really felt the pain and resulted in many Australians’ retirement plans being disrupted, Heunis says.

According to the survey, more than 40 per cent reported their income falling by half on retiring. That was about double the global average and far ahead of other Western markets, including the US at 16 per cent and Britain at 24 per cent. Apart from the financial crisis, Australian retirees blamed the drop in income on unexpected events or expenses such as children moving back home, health-related costs as well as insufficient planning. Only 60 per cent of retirees said their preparations for retirement turned out to be at least “adequate”.

HSBC’s Future of Retirement: Life after Work? report also shows that one in six working Australians believes he or she will never be in a financial position to fully retire. That is higher than the global average of 12 per cent and on a par with the US and Britain.

“What stands out from the report is the large proportion of people underfunding their retirement,” Heunis says. “One of the big underestimations is the cost of healthcare as they get older.”

People should be seeking good financial advice because the consequences of not receiving it can be dire, he says.

On average, Australians expect to fully retire at 64 (compared with the global average of 59), which is three years later than when their parents left the workforce.

“Today’s workers should prepare for retirement as early as possible to have some certainty for retirement,” Heunis says


“Life is full of reasons to prioritise short-term spending over long-term planning, but the sooner people start saving, the less likely it is that they will have to keep working later in life.”

Australians are working longer but are also embracing semi-retirement in greater numbers. One-third of Australia’s 55-64-year-olds are semi-retired. And more Australians in the future will opt for a phased retirement. More than half of working Australians say they expect to semi-retire before they retiree fully. But the survey reveals a view among those in semi-retirement that they may have been too hasty in giving up paid employment. Nearly two-thirds who entered semi-retirement wished they had stayed in full-time employment longer. The survey is based on responses from 16,000 people in 15 countries, including 1000 within Australia, and was conducted online between July last year and April this year.

Source: The Age – Money – 22nd September, 2013 – by John Collett

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