Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 106

Retirement catches most people unplanned

Few issues in retirement planning have received more attention in recent years than life expectancy and longevity. Most people can expect to live to 90 or 100 years, which could mean 30 years in retirement, financed by either a meagre government pension or personal resources.

It’s understandable that people do not worry about retirement savings while in their 20s and 30s, and even into their 40s with children and mortgages to worry about. But research on Australian retirement by three academics, Julie Agnew, Hazel Bateman and Susan Thorp, leads to the following conclusion:

We find that more than half of Australians in their 50s and 60s have not planned key aspects of retirement. A small minority have detailed and advanced plans. In addition, expectations around these issues and actual realisations may not be well matched.

Work, Money, Lifestyle: Plans of Australian retirees, JASSA Finsia Journal of Applied Finance, 2013

A minority choose their own retirement date

The survey asked 920 Australians aged between 50 and 74 years about their knowledge, values and plans around retirement age. The majority of not-yet-retired had done virtually no planning for the transition to retirement, perhaps because they expected to decide for themselves when they would stop paid work. However, of those who were already retired, only 40% said they decided their own retirement date, while 60% were either forced to retire or encouraged out of the workforce, as shown in Figure 1.

Figure 1: Relative ranking of reasons for retirement by already-retired people

(The bar lengths are determined by counting the number of times people ranked the reason as ‘most important’ and then deducting the times when it was ranked ‘least important’. Survey respondents were shown sets of statements listing the reasons for retirement and were asked to choose the one that most applied to them and the one that least applied to them).

As Figure 1 shows, the most important reason to retire was ‘I wanted to do other things’, but factors beyond the retirees’ control, including personal health and unwelcome work environment, were major factors in retirement. As the authors state, “The likelihood that events outside one’s control determine retirement timing makes advanced financial preparation more critical.”

Figure 2: Financial planning by labour force status, % of sample

Only 48% of Australians aged 50 to 65 years have attempted to work out how much money they will need for retirement. About one in three has a firm plan on how they will reach their retirement needs. It’s not surprising then that about half of pre-retirees expect their standard of living to decline in retirement.

Activities and lifestyle

The survey also revealed that about 40% of pre-retirees had given little thought to what they might do in retirement. For those who made plans, travel and leisure activities were priorities. Those who had already retired reported carer responsibilities and volunteering had been more important than anticipated. Of those who had returned to work, most said it was for work enjoyment rather than needing the money.

So while there is generally a lack of planning for retirement, Australians are looking forward to more travel and leisure. Let’s hope they've got the money to enjoy those retirement years, because there will be far more years than most of them expect.

 

Graham Hand is Editor of Cuffelinks and has worked in the finance industry for 38 years.

 

RELATED ARTICLES

The reality of three phases of retirement

The new retirement challenges facing Australians

Five steps to ease retirement stress and FORO

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.