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There are 4.2 million retirees in Australia today, and according to new research by life insurer TAL, 28% of them wish they’d spent their money more freely and enjoyed the early years of their retirement more.
A further 16% wished they’d worried less about saving their superannuation for a rainy day.
TAL has just released a research paper documenting what retirees wish they’d known before retiring.
Let’s delve deeper and discover the lessons this provides for pre-retirees still in the workforce today.
Retirement regret 1: Not planning well enough
The research shows 22% of current retirees are concerned their superannuation monies will run out. This has led to financial stress among 32% of retirees aged over 80 years as they draw down their savings.
The AFSA Retirement Standard provides guidance on how much Australians need for retirement.
It says Australian couples need $690,000 in superannuation, and singles need $595,000, plus full home ownership and a part-pension, to afford a ‘comfortable retirement’.
Alternatively, just $100,000 in superannuation for couples and singles, plus a part-pension and full home ownership, is enough for a ‘modest retirement’.
These figures assume retirees draw down their super capital and invest it with a return of 6% per annum.
According to the Australian Bureau of Statistics (ABS), superannuation is the main source of income for more than one in four retirees and at least one source of income for almost 40% of retirees.
Retirement regret 2: You may be forced to retire early
Many people expect to retire between the ages of 65 and 69 but 59% retired earlier, according to TAL.
This reinforces the need to plan ahead financially, as you may not have until your 60s to get organised.
A new report from the ABS reveals four of the top five reasons for retirement involve unforeseen circumstances. Examples include redundancy, injury, or having to care for someone else.
Ashton Jones, General Manager of Growth, Retirement & Wealth Partnerships at TAL, said:
When retirement arrives sooner than expected, it can derail a person’s ability to prepare as much as they’d like to.
Some common themes that emerged for retirees were that many wish they’d put more into superannuation when they had the chance, or that they’d started salary sacrificing earlier.
Financial advisory Findex says more than one in two Australians are unaware of the significant tax savings available through salary sacrificing or making extra personal contributions to their superannuation.
Retirement regret 3: Not expecting to live this long!
The TAL report reveals one-third of retirees expect to live longer than they anticipated when they first retired. TAL says this highlights the benefits of retirement products that pay an income for life.
Upon retiring, Australians typically take one of five actions with their superannuation nest eggs.
The most popular choice is converting super into a regular income stream via a pension account (34%). A further 27% left their money in their existing super account. A lump sum was taken by 15%. Finally, 18% moved some or all of their super monies into a lifetime retirement income stream, like an annuity.
Were retirees happy with the decisions they made?
With the benefit of hindsight, it seems many people would have made different financial choices in retirement.
The research showed 56% of retirees who withdrew all or most of their super were happy with that decision.
By contrast, 87% of retirees who moved their money into a lifetime income stream or pension account were happy with that call.