A study commissioned by CPA Australia has pointed to the fact that household debt levels are outstripping superannuation balances for those approaching retirement.
An analysis of Household, Income and Labour Dynamics in Australia (HILDA) data by KELLYresearch director professor Simon Kelly found that property debt grew by 94 per cent between 2002 and 2010 and 'other debt' was up by 50 per cent.
In the same period, superannuation balances for the 50-64 year age group only grew by 48 per cent.
"The increase in property prices has provided many with the opportunity to increase their debt and use it to assist others or sometimes to live a life beyond their means," said the study.
As a result, some Australian retirees are likely to have a mortgage to pay off in their retirement, which will impact their quality of life, according to the study.
"This will even further reduce the chance of them having enough savings to meet their expectations and increase the likelihood of them relying on the age pension for their retirement income," said the study.
In addition, the study suggested that the knowledge that there will soon be a lump sum available makes people more willing to take risks prior to retirement.
"It seems that as people are approaching retirement they are using the equity in the family home as a source of funds to assist their children into homeownership, to take an overseas trip, retire early or simply to enjoy a lifestyle their income cannot support," said the report.
CPA Australia chief executive Alex Malley said it was time the industry considered compulsory income streams in retirement, and moved away from the "lump sum as windfall" mentality.
"The system appears to be failing on a number of key aspects, adversely affecting those on lower-incomes as well as encouraging higher risk and higher geared investment behaviour among those on higher incomes," said Malley.
"It is time for leaders of every stripe to set aside the standard vested interest arguments and seriously consider how the system could be rebuilt for optimum result - this includes leaders in politics, business, unions and the funds industry," he said.