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Australians’ unrealistic retirement expectations

[Vanguard has released a report called 'How Australia Retires' about our attitudes towards retirement and how we feel about this phase of life. It surveyed 1,814 people, 20% of whom were retirees, and the remainder were working-age Australians. Here are the report's key findings.]

Expectations of retirement differ greatly from reality

Between working-age Australians and those already retired, there exists significant variance on the ideal age to retire, how they envision they will spend their time during retirement, and crucially, how much income will be required to fund their ideal retirement lifestyle.

Working-age Australians do not agree on an ideal age to retire. While the average ideal retirement age reported by respondents is a little over 61 years old, there is significant variation in responses across the different age groups surveyed.

On average, those participants aged between 18 to 34 hope to retire by age 59.5, those aged between 35 to 54 hope to retire by age 61.5, and those aged between 55 to 75 and beyond want or wanted to retire by 64.9 years old, a notable increase in ideal age for those entering the pre-retirement phase (over 55 years) when compared with the perceptions of younger age brackets.

This suggests that as working-age Australians edge closer to their retirement phase, their expectation of the ‘ideal age’ at which to retire increases. This might be a result of Australians becoming more realistic about their retirement age as they near this phase of life, as opposed to younger Australians who might be more idealistic about earlier retirement or haven’t yet given retirement planning appropriate thought.

When considering their circumstances, working-age Australians agree that between 65 to 66 years old is the realistic age at which to retire.

On average, young Australians under the age of 35 see their realistic retirement age as 65.4 years old, those aged between 35 to 54 see their realistic retirement age as 65.7 years old, and those aged between 55 to 75 and beyond believe 66 is a realistic retirement age.

50% of working-age Australians want to retire with a yearly income significantly higher than the yearly income currently required by older generations.

When contemplating their desired yearly income during retirement, working-age Australians who are yet to retire expressed that they would like to have an income of on average $99,000 per annum (assuming today’s dollar value). Those who have already retired said that they desire on average $68,000 (in today’s dollar value) as a yearly income, significantly less than the desired income of current working-age Australians.

Interestingly, the figures were much lower for both working-age Australians and current retirees when asked about the minimum yearly income they think they would need in retirement, with working-age Australians indicating an average of $62,000 (assuming today’s dollar value) and current retirees stating approximately $41,000 on average (assuming today’s dollar value) per annum. While the yearly amount that current retirees perceive they need is significantly lower than their desired yearly income, current retirees still indicated they need substantially less than working-age Australians did, which may suggest that retirees find they can manage on a lower income than expected.

With more time to work towards their retirement goals, working-age Australians may be setting themselves higher post-retirement income targets and setting a new retirement standard. However, there may also be an element of working-age Australians’ expectations of retirement not aligning to reality. This could be because:

  • Working-age Australians may not be able to effectively predict what their financial wants and needs will be during retirement, especially due to retirement not being in their near or immediate future.
  • Working-age Australians may not be able to envision their retirement lifestyle, therefore not being able to effectively foresee how their current incomes and expenses will translate to their retirement income and expenses, which may be leading to an over-estimation of their retirement spending needs.
  • Working-age Australians are less likely to own their home compared to older generations, leading to expected rental expenses.
  • Working-age Australians’ expectations of retirement lifestyles and the activities they would like to differ from expectations held by older generations. For example, when asked about the lifestyle they would like to lead in retirement, working-age Australians prioritised travel (should financial considerations allow). Current retirees, however, prioritise spending time on hobbies.

Superannuation is still the foundation of retirement savings

50% of working-age Australians view superannuation as a key part of their retirement plan but expect it to account for a smaller proportion of their total assets than current retirees.

54% of working-age Australians estimate that their superannuation balance constitutes 50% or less of their total investment balance. That is, at least 50% of that total balance is comprised of non-superannuation investments such as savings account, property they live in or investment properties, and shares and exchange traded funds (ETFs). Most notably, 1 in 4 working-age Australians highlight investment property as a key part of their financial plan.

By contrast, while only 1 in 3 current retirees consider superannuation as a core part of their financial plan, especially those younger than 65 years old, they are more likely to rely on it. Retirees are significantly more likely to expect the Age Pension to form a part of their retirement plan, and only 1 in 10 report investment property as an asset.

Despite the importance of superannuation in working-age Australians’ plans, fewer than half make additional superannuation contributions to maximise their future returns.

Financial information is abundant but professional advice creates value

In recent years, the financial advice industry has faced severe criticism and undergone substantial structural change following the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.

Consequently, these developments have resulted in a lack of trust in the financial advice industry, and it is therefore not surprising that working-age Australians would seek alternative sources of guidance and advice. The proliferation of social media and online forums has also spawned a wide range of channels, with some being useful hubs for information-sharing but many offering unsubstantiated information without the required regulatory authorisations and oversight.

In addition, the cost of seeking financial advice remains a barrier for many Australians and is driving a growing advice gap that may be detrimental to their financial outcomes.

Almost 2 in 3 working-age Australians have never engaged a financial adviser.

Financial advisers are not the leading source of professional guidance for working-age Australians. Superannuation funds are in fact the primary source, alongside banks, accountants, and government websites.

Working-age Australians however are more likely than current retirees to consult a non-professional source, preferring to do their own research or seek guidance from their partner or family and friends. This indicates a wariness of professional advice (whether that be due to a lack of trust or as a result of high fees) or simply because friends and family are more easily accessible.

Working-age Australians are also much more likely to seek information from digital sources including podcasts, blogs, and social influencers. In contrast, retired Australians predominantly consult professional sources of guidance, such as financial advisers or their superannuation fund.

Despite the abundance of financial information online and elsewhere, the study found a strong relationship between the use of a professional financial adviser and the retirement confidence it can inspire.

Of the study participants that have received professional advice, 44% indicate they are extremely or very confident in funding their retirement.

In contrast, Australians who have not sought professional advice, only 25% report being extremely or very confident in funding their retirement.

Australians who have received professional advice are also twice as likely to have a clearer, more detailed retirement plan, and are twice as likely to feel confident that they will be able to fund their retirement lifestyle.

Working-age Australians who have developed their own financial plan are relatively likely to have prioritised budgeting and regular savings, while those with a financial plan from an adviser are more likely to prioritise superannuation contributions. 

Further, those who have a more detailed plan have typically taken more purposeful action to prepare for retirement, particularly in debt management and budgeting while also making additional superannuation contributions and investing in securities and property.

Vanguard Investments is a sponsor of Firstlinks. This article is for general information purposes only. Vanguard has not taken your objectives, financial situation or needs into account when preparing this article so it may not be applicable to the particular situation you are considering.

For more articles and papers from Vanguard Investments Australia, please click here.


Joanne Earl
May 15, 2023

Well it would greatly help if ASFA and Super Consumers could start publishing modest and comfortable retirement standards that meet the need of all Australians not just the 1/3 homeowners. With all the nuanced data available from CoreLogic I would have thought it was a no-brainer to generate estimates that include renting, mortgages and strata fees.

May 15, 2023

Those figures are general in nature anyway.

At the end of the day what it's what you need to retire. Not some generalised figure in an article.

If your yearly budget is going to be $80k a year including housing costs for renting or body corporate you'll need around $1.6M to retire and still preserve most of your capital. Less if you are prepared to let your capital run down a little each year. $1.6M in pension phase from Super would give you $80K a year tax free.

There is also the aged pension depending on what your asset and income situation is.

It certainly is getting harder to be a retiree and still renting in Australia.

I'm 55 and still rent but will buy a property when I can access my Super.

I'm not keen on being a renter after 60.

May 16, 2023

Is being 55 and renting when likely on a pretty good wicket something you’d advise people to do ? Can you comment on that choice please? Very interesting .

May 17, 2023

Harry, I can't advise anything.

People's circumstances are different.

After my divorce in which the ex got the house and everything in it and I got to keep my Superannuation I made the choice to rent instead of buying as at the time renting was cheaper than buying. With child support payments for 3 children I chose renting over buying as I didn't have a lot of cash.

I put extra into my Superannuation with the intention of retiring to Thailand when I turned 50. The government changed the rules on leaving the country permanently and taking your Superannuation with you.

I then thought I'd Transition to Retirement at 55 and work part time, I'm now 55 but can't because the government raised the TTR age to 60.

My Superannuation has performed well and left me in a financial position far beyond where I thought I'd be after the divorce.

Financially there is no doubt I'm in a better position having rented and paid extra into Superannuation even allowing for rent paid.

Had lunch at the local with my boys the other day and we were talking about housing etc.

The two older ones have been knocked back on mortgage applications. I said I can help them out when I retire.

Talked about the marital home which has gone up in value about 4 times what we originally paid.

My Superannuation is up about 15 times it's value at divorce.
In 5 years time it is likely to be even higher even allowing for current economic conditions.

Renting and investing can be better than buying. It's not for everyone.

I could happily keep renting longer but I'm thinking having my own place as a age is the better way to go.

May 15, 2023

Calculate how much capital is required to generate income equal to rent.

Assuming never need to move, no inflation, no rent assistance, no tax, ..., just constant rent / y, then the calculation is:
= (Rent per year) / (Capital return per year)
= (52 weeks * 500 per week) / (5% per year)
= $520,000

Mike O'Neill
May 14, 2023

At age 72 and partner 70, we are where we want to be, retired,financially independent, generally healthy but in need of regular GP and specialist attention to remain so, able to spend time with grand kids and do as we want.
At an early age in my 30's I set out to retire at 50, this I amended in my 40's to be retired from full time executive life at 50 with a portfolio of income generating business activities that I would reduce as I aged. And I made it, and at age 65 my wife and I set sail on a cruise ship to celebrate. My wife did not return to paid employment after the birth of our first child and remained as the Home Manager enabling me to invest excessive hours and trav3l into my career from which we intentionally invested funds. Yes, after tax funds in my wife's name to ensure she still felt independent and free should the need or circumstances arise.
You can have a plan but it must be flexible as you move into full retirement. What seemed ideal and realistic prior retirement can be shattered with a phone call or text message.
All our planning is now in house with my wife and I agreeing quarterly as to next steps when I present the latest update of SMSF. Over many years we've taken professional advice and lost out. We now test all our assumptions by using various sources and if needed confirm our approach meets 'current' taxation law.
We both shudder at the sight of Bill Shorten in the media and cringe when Bowen gives commentary about his next big plan for Australia. These 2 alone are the biggest concern any retiree should have to the soundness of their retirement nest egg.

May 14, 2023

Distant expectations are hopes unmodified by reality.

Calculations based on guesstimated parameters help make estimations of yet to be revealed yet to be reality.

A much rationalised target at which to retire is capital 25 times expenses, or income, at commencement of retirement. Predicated on 4% rule (100% / 4% = 25). The objective being 'Financial Independence'.

25 times expenses is 'Lean' with less 'Financial Resilience', 25 times income is 'Fat'.

Time to retirement can be dramatically reduced by small expense to income ratio.

Readily modelled in simple spreadsheet.

May 14, 2023

The 4% rule has no merit in my retirement plans as I know I will spend considerably more in the early years of retirement than later years.

New car, overseas travel, grey nomad travel in Australia.

May 15, 2023

Fetch up at Age Pension Qualifying Age with all Assessable Assets $ exceeding Age Pension Taper Threshold stuffed in home and claim Age Pension. Then gamble 100% of Investible Capital on Index Share Fund. Withdraw 4% inflation indexed for historically derived 90% chance of not exhausting capital in next 30 years.

If too much capital make that viable, consider ~4% rule for the lot.

May 15, 2023

Brilliant explanation Dudley.Can you share any rough modelling you have sued in the past?

May 15, 2023

Robbie, just google 4% Rule or Financial Independence Retire Early. F.I.R.E

Ian M
May 14, 2023

At the end of the day, I think the key is having a reason to get out of bed!
For some that will be work, volunteering, playing golf, looking after grandies or caring for someone.
Routine is important and you want to make sure that you're ticking off the act, belong, commit boxes.
I've been a financial planner for over 25 years and over that time the three things I hear over and over again are - I should have retired earlier, I didn't need as much as I thought, and I've never been busier!
A very content retiree told me once that in retirement your weekends stay the same, but you need to break up your days - have a day with your partner, a day with friends/family, a day by yourself and then you might work/volunteer a day or two and before you know it you will be flying along.
For me the best thing I'm looking forward to (if I get to retire) is having a blank canvas to fill in the day as I see fit and having no more excuses to all those times I tell myself 'one day I'll get around to it'.

May 14, 2023

I will retire at 60 and friends, co workers and family ask me what I will do when I'm retired.

Be grateful every morning that I don't have to get up and go to work.

May 18, 2023

Financial security, meaningful relationships and a sense of purpose. These are the psychologiists pillars of contentment. The cash is only part of it, and financial security does not mean fabulous wealth. I know plenty of well off people, with plenty of cash wondering how to make themselves more useful or relevant

May 14, 2023

"..Expectations of retirement differ greatly from reality..."

No - "Expectations of retirement differ greatly from Person to Person!"

There is no homogenised answer, not should there be, unless you wish to live in a Socialist State that "knows better", a road now heading out of Canberra in all directions!

May 14, 2023

Like so many other people I wondered about retirement during COVID while I “worked from home”. I sold an investment property for top dollar and thought some more. Then I found I had reached “preservation age”. I did some calculations and engaged a financial adviser to confirm I was right - I could stop working. So I did. Then I found I was bored - like, there are only so many cups of coffee and walks in a day. Now I’ve decided to go back to working when I want. It’s a pretty good feeling to know you can go when you want and not have to tolerate the jerks in your industry. Maybe that’s what is meant by retirement freedom.

May 14, 2023

When your income from investments/super is sufficient, work becomes optional. At that point you do what you want to do, not because you have to. That is the essence of a happy retirement.
When calculating retirement income, remember that, assuming you have done your planning, you don’t pay tax, or a mortgage, or school fees or super contributions. And a lot of expenditure like travel and eating out are discretionary.
As Eisenhower said: “Plans are worthless but planning is everything.”

May 15, 2023

what is your occupation Brian...?

May 14, 2023

Maybe 60 is a good age to start easing out, move from full-time to part-time work, and may be in a different capacity. Those with sufficient retirement income, can make the transition through volunteer work, and that is open-ended. You can do it in one form or the other till you die, just never stop working and thinking or just being physically and mentally active.

Joe smoo
May 13, 2023

I like working. Retiring doesn't have much appeal to me.

May 14, 2023

There is no right or wrong on this.

Some people keep working because they love the money, or feel the should do it for the kids.

Some keep working because even if they don't need the money it's still a form of social interaction

Some would like to keep working but health issues may mean they need to stop working.

Others are content with their financial position and retire to pursue other interests and hobbies

Some retire to be babysitters for grand children so to help out.

At the end of the day, we hopefully get to do what we wish to.

May 14, 2023

The survey is sterile stuff

May 14, 2023

I agree Joe. I would be more worried about being bored if I retired early.

Not a boomer fool
May 13, 2023

No most 35 and under don’t believe we will have a retirement age because if it’s increases the way it has they will be dead before reaching preservation age

May 13, 2023

Preservation age is what it's always been. Hasn't moved.

May 13, 2023

Doesn't mean it won't.

I expect both aged pension age and preservation age to be both be higher in 25 years time.

Mark B
May 14, 2023

Not quite true Geoff. They moved the preservation age from 55 to 60 over a number of years based on your year of birth, 58 for me and 59 for my wife. I agree with Mark it's very likely that in the future it will move again to keep people in the workforce longer.

May 14, 2023

The preservation rules are what they've always been. Nothing has changed. The rules about your date of birth and how it interacts with your preservation age have not changed. If you haven't met your preservation age, that sliding scale is now irrelevant.

You all may be correct about changes to the preservation age in the future, who knows? I wouldn't rule it out. But that's conjecture. Knock yourselves out with the crystal balling. I'm talking about the rules as they currently exist.

The other thing is that there is no "retirement age" - there is superannuation preservation age and there is pension age. Retire whenever you want, and can afford to, given the ability to access super and other investments.

May 14, 2023

They raised the Transition to Retirement age from 55 to 60.
Aged pension age has been raised and will likely be raised further in the future because 1 we are living longer and 2 the government will want us working longer so it makes sense that when the raise aged pension age, preservation age will rise too to be closer aligned. No point keeping preservation age at 60 if pension age is 70. I'd expect preservation age to rise to 65 when aged pension age raised to 70.

True that you can retire whenever you feel you have sufficient money to fund that retirement however it is a common misconception that retirement and aged pension go hand in hand and people equate the two together. A smaller percentage of people are self funded retirees.

May 17, 2023

Simply not true. Access to my super has gone from 55 to 60 over the course of my working life. I am currently 58 years old.

May 17, 2023

No. It simply is true/

The sliding scale of preservation age - when you can access your super - has been in place for a very long time and has NOT changed. Really. It hasn't. I worked in super and I published this schedule on our super product's website way back in 2007 and 16 years later this schedule is EXACTLY THE SAME. And those rules were in place well before 2007.

Different preservation ages have only ever affected people born before 1 July 1964. If you were born after 1 July 1964, your preservation age has ALWAYS been 60.

TTR accounts have always been available to anyone who has met their preservation age and is under 65. That hasn't changed either.

What you think you are seeing as a "change" is merely the implementation over time of a very long standing set of age-based rules - how it was always intended to be.

May 18, 2023

Geoff, the gradual changes to super preservation age were announced in the 97/98 Budget. Prior to this time access to super was at 55. 1997/98 is a long time ago but was definitely during my working life.

May 30, 2023

As if there's even going to BE a pension in 25 years time for Gen X. And if there is, you won't want it (it will be too low) and you won't qualify for it (because you'll have too much money and assets), or they will change the age at which you can get it. Watch. Gen-X will be the REAL, 100% self-funded retirees, out of necessity.

Former Treasury policy maker
May 31, 2023

More fool the under 35s then. You may not be a "boomer fool" but you're a younger fool if you really think that the retirement age has increased so far that it now precludes having one! It was 65 for many decades and the only reason it's increased at all (slowly on its way to 67) is because we now live longer. If it increases further in the future it will only be because life expectancy keeps increasing.

Do a bit of basic study of economic policy and its history please or you're going to make some really dumb decisions.

May 12, 2023

I think 55-60 would be a good age for most to retire your body in falling apart by then health issues are on the rise if you have worked most of you life at that age you should hopefully be wealthy enough to retire early and live out your final years enjoying doing what ever you want to do with your spare time.

The reality of it is thou taxes insurances rates cost of living etc etc are rising unless you have upwards of 1.5 mill at today dollar in superannuation you will need the pension to help fund your retirement .
Anyone with investment property or a large property worth x amount of dollars will be to asset rich to claim the pension there for downsizing and selling off there asset or forever home and then living off any extra funds left over from the sale of these assets as you'll be to rich in an asset test to get the pension the banks and gov will know of every dollar you have or have spend if they get there way of a cashless society.
In short you'll get nothing unless you're poor as a crow and then you'll be lucky to survive living on 2-minute noodles in acshare house or living in your daughter's garage or spare room.

Anyone now trying to set themselves up with ivestment property are playing more in interest rates ,rates ,insurances etc and it's only going to get worse there for they have to consider is it worth selling of their liability they were going to use for retirement as it's not viable to pay X amount in dollars in interest every year in rates insurance taxes etc etc so realistically you're better off selling up downsizing now and enjoying an Early Retirement because the world's gone mad and the working class is the ones going backwards but getting screwed over

Ian Lange
May 14, 2023

you are the epitome of a 'glass half empty' Adam - please lighten up and enjoy your life !

May 12, 2023

I would like to know if your figures are for a Single or a Couple. Also hat might think the younger generations, is that there are incomes taxes on Superannuation and therefore an expectation of $100k before tax = $68k after tax.

May 13, 2023

Once in pension phase Superannuation is tax free, at least up to ones transfer balance limit.

May 11, 2023

We retired early, ages 50 and 52. I have a range of investments to support us until we reach preservation age for Superannuation. Having been retired now for 3 years I am surprised how little we really spend. I had planned for $80k - $100k a year but we are more like $60k and that includes Australian holidays in Airbnbs. We are intending to head OS next year now that the pandemic is behind us so that will bring us up on the expenditure. We eat out when we want, but now that we have more time we are happy to cook gourmet meals to enjoy with paired drinks in our courtyard - especially midweek at lunchtime...

May 14, 2023

Sounds like us. Early retirement is not as scary or expensive as it is made out to be. My rule of thumb as a self funded retiree is to target 3X the Age Pension as a financial metric. However we are battling to spend 2X the AP.

Craig B
May 11, 2023

As the numbers confirm, current retirees use financial advice from their superannuation fund, this probably like me is to gain a Statement of Advice (Retirement Plan), the missing gap is that is not provided by the fund or the financial advice industry is a product to review the SoA periodically. My experience is my fund only provide SoA's at the standard cost and other financial advisors cannot review another plan not provided by them. So now instead of gaining an informed review (at top dollar) I rely on digital information, and government websites to fill the gap. Thank you Centrelink, what an informative service.

Ian M
May 14, 2023

Hi Craig, You're right!
I work for an industry super fund and we normally charge $3-4,000 upfront for a plan but when it comes to reviews, we don't have a specific ongoing review service - I suspect that this is a result of the fear that we end up in a fee for no service situation like Aware Super.

May 11, 2023

I'm fully relying on my Superannuation to fund my retirement as divorce left me with little assets outside of Superannuation. Fortunately Superannuation has served me well and I'll be retiring on a 6 figure sum from Super when I reach preservation age of 60.

Even after buying a property to live in Super will provide me with an income higher than I get currently working.

Travel in the early years of retirement high on the agenda.

May 14, 2023

There is a huge difference in extremes when quoting a 6 figure sum. Which extreme are we talking about : $100000 OR $999000 ??

May 14, 2023

There is no difference when it comes to be able to retire or not. Only the lifestyle led.

100k a year tax free from pension phase for a single person is more than most people earn a year. If one was still working they'd have to be earning more than that to have $100k after tax.

I don't have figures but I'd hazard a guess that most retired couples don't have $100k income.


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