Future retirees face expenses shock
There is a significant gap between income expectations and the financial realities of a life in retirement, a new study from Schroders Global Investors has revealed.
The survey revealed while Australians expected to spend an average of 39 per cent of their retirement income on basic living expenses, they actually require around 58 per cent, and 61 per cent of respondents felt they did not have enough income or could do with more.
Respondents also predicted they would need 71 per cent of their current salary or income to live comfortably, while they only receive 52 per cent of their final working salary annually.
Global head of retirement, Lesley-Ann Morgan, said there was a real danger that people globally were underestimating the proportion of their retirement income that would need to be allocated to basic living expenses.
“There is no magic wand for people,” she said. “To avoid facing challenging financial circumstances on retirement, they need to recognise the need to start saving as much and as early as possible.”
Head of distribution, Graeme Mather, said it was reassuring to see that Australians were saving, on average, 12 per cent of their income for retirement, but said there was still a savings gap to overcome.
The study showed, however, that given the need for more income in retirement, retirees were continuing to invest.
Mathers said it was important that the retirement investment solutions available to retirees helped them meet their expectations and avoid surprises.
Recommended for you
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
Morningstar is going to offer research ratings of funds in the $3.5 trillion superannuation sector for the first time in response to demand from financial advisers.
Treasurer Jim Chalmers has opened a consultation into the design of the annual superannuation performance test, canvassing views on a range of reform options.