Two sides to the retirement confidence coin

Australians are increasingly conflicted on their outlook towards retirement, with some confident their savings will sufficiently last while others say they no longer see themselves as retired at all.

The TAL and Investment Trends 2023 Retirement Income Report, which surveyed over 10,600 respondents aged 40 years and over, found that longevity risk is becoming less of a concern to them than before.

Australians are more optimistic about how they will fund their retirement, despite inflation and rising interest rates, the research observed.

For the first time in nine years, a greater number of retirees anticipate their savings will outlast once they stop working (35 per cent) than those who expect to outlive their retirement funds (33 per cent).

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The majority of Australian retirees (60 per cent) expressed they are able to live comfortably, an increase from 55 per cent in 2022.

“Super funds are increasingly lifting the bar to better support members in retirement,” said Ashton Jones, TAL general manager for growth, retirement and wealth partnerships.

“Educating members as they shift their thinking from accumulating super during their working lives to having an income to draw down from in retirement can improve member confidence and outcomes, as mandated by the Retirement Income Covenant.”

However, the 2023 MFS Global Defined Contribution Survey presented conflicting information, which includes responses from 1,000 super fund members.

The research described that inflation has instead eroded retirement confidence. Some 74 per cent of Australians said they will need to save more than initially expected.

Over 60 per cent said they will need to work for longer and 40 per cent no longer see themselves retiring at all.

Joshua Barton, MFS Investment Management managing director and head of Australia and New Zealand, explained this demonstrates the importance of financial advice.

“While the loss of retirement confidence in Australia is in line with global peers, it highlights the role that effective advice can play in helping investors meet their retirement objectives. 

“We need to continue to open pathways to advice across the superannuation system, including through superannuation funds and employers and new technologies to support Australia’s sophisticated yet smaller advice market,” he commented.

The MFS research found that one in three Australians desire in-person or video contact with a human financial adviser. 

Meanwhile, family and friends are a key source of adviser introductions for 36 per cent of those surveyed.

Barton continued: “This is particularly important as the industry readies for superannuation’s historic transition from savings accumulation to income drawdown. We must embrace the regulatory and legislative relief changes geared towards delivering better financial outcomes   that can help insulate retirees, current and future, from market cycle stress.”