Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 223

Understand the retirement income challenge

Recent research on over 5,500 senior Australians showed most are aware of their increasing longevity, but there were some surprising findings into retirement expectations. National Seniors Australia (NSA) and Challenger surveyed a broad representation of NSA members. Regular, constant income covering essential needs came out as the major requirement in retirement, but other results were less predictable.

Limited intentional bequests

While Treasury officials might be worried that older Australians are looking to build up a tax-free super nest egg and pass it all onto their kids, that is not the motivation for older Australians. Only 3% of respondents indicated that they intended to preserve all their capital for the next generation. These are probably wealthy older Australians who can afford to live off the income from their assets, rather than having to draw down the capital.

This doesn’t necessarily mean that senior Australians have turned stingy. Indeed, the split was roughly even between those leaning towards preserving capital and those looking to spend it down. Only 10% want to spend down everything. In practice, it seems that retirees are not spending it all (at least not yet).

So, what is driving the observed behaviour?

Understanding the implications of longevity

The survey highlighted that most retirees are aware of their increased longevity. 83% reported an awareness of a likely 6-year increase in life expectancy compared to their parents’ generation. 49% reported making financial plans for retirement and 47% have plans for medical and health expenses. These are all signs that Australian retirees are aware of the need to manage for longevity.

This awareness could also indicate why they don’t think they will be leaving money for the kids. They’re not sure that they will be able to afford it.

Living longer means that retirees will have to fund their spending for longer and it is probably more that the retirees are looking after themselves first. Only if they don’t need it will they leave something for the kids. Comments from individual respondents reflected the theme that kids are in a better place than current retirees, potentially due to the existence of superannuation (i.e. they already have their own retirement savings).

In terms of planning, making sure that they have income for the rest of their lives was a high priority, but it wasn’t what they were most concerned about.

Preference for regular income

Top billing in this year’s survey went to the need for regular income to meet essential needs. A previous survey in 2012 had ranked money for health costs as the top priority, but a broader focus, that includes other essential needs, topped the list this time.

The chart below indicates the key concerns that seniors have around their finances. While lowest ranked, many still consider it important to leave an estate, suggesting it is more about the capability, rather than the intention, that is likely to limit what the average Australian retiree will bequest.

Seeking financial advice

Another element of the report that might surprise was the high number (59%) who reported using a financial adviser. With around 160,000 households retiring every year, this suggests that there are around 100,000 pieces of advice (or information) from advisers about retirement. This might seem a little high, but it includes some limited advice (including general advice). Based on other surveys, it’s likely that less than half of them maintain an ongoing relationship.

With a growing number of baby boomers set to retire in the coming years, the demand for quality advice will only increase. With the increase in goals-based advice strategies, the report also gives some pointers about the key goals for retirees.

In summary, beyond the timing of the next overseas trip, the key goals are to generate a regular stream of income to meet essential spending and meet health and aged care costs later in life.

It would be hard to argue an adequate goals-based plan has been developed if it does not include solutions to meet each of these goals for a retiree.

 

Aaron Minney is Head of Retirement Income Research at Challenger Limited. This article is for general educational purposes and does not consider the specific circumstances of any individual.

4 Comments
Jack
November 23, 2017

If life expectancy is such that many people are now living until age 90, it is likely that their children will be in their late 50s or early 60s when they inherit.

In that circumstance it is debatable how much of a helping hand from their parent's inheritance these children will need at that age.

Graham Hand
November 23, 2017

Completely agree, Jack. I think that's why 'The Bank of Mum and Dad' is such a major factor in the property market. If you have the money now and plenty for the future, what's the point of your kids inheriting the money when they are 60, after they've struggled when they were 30 to 40 to pay off the mortgage on a modest home while bringing up a family and holding down two jobs. Then the kids leave home and they don't need the money. Better, if possible, to give a chunk to them at age 30 and let your extended family enjoy a better quality of home. I'm not saying you make life easy for them, but $500,000 buys nothing in Sydney.

Aaron Minney
October 19, 2017

Hi Ashley
That was covered by the question in the report which is available from the National Seniors Australia website (https://nationalseniors.com.au/be-informed/research/publications/seniors-more-savvy-about-retirement-income).
The responses to the question split down the middle between spending most/ all or preserving some/ all (51/49).
An inheritance was also the lowest ranked priority with 23% viewing it at very important to leave something to the next generation.
While it is important to many (certainly not all), there was a strong suggestion that they want to spend their money on themselves first, and the estate was a residual rather than an explicit objective.

Ashley
October 18, 2017

I see that only 3% of respondents indicated that they intended to preserve all their capital for the next generation, but what if the question were: “Do you intend to preserve PART, or a substantial part, for the next generation?" You might get a different story.

 

Leave a Comment:

RELATED ARTICLES

It's not a shock that retirement is different

Are lifetime income streams the answer or just the easy way out?

Time to build a super system fit for retirement

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

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.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Latest Updates

Planning

Will young Australians be better off than their parents?

For much of Australia’s history, each new generation has been better off than the last: better jobs and incomes as well as improved living standards. A new report assesses whether this time may be different.

Superannuation

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

Investment strategies

A steady road to getting rich

The latest lists of Australia’s wealthiest individuals show that while overall wealth has continued to rise, gains by individuals haven't been uniform. Many might have been better off adopting a simpler investment strategy.

Economy

Would a corporate tax cut boost productivity in Australia?

As inflation eases, the Albanese government is switching its focus to lifting Australia’s sluggish productivity. Can corporate tax cuts reboot growth - or are we chasing a theory that doesn’t quite work here?

Are V-shaped market recoveries becoming more frequent?

April’s sharp rebound may feel familiar, but are V-shaped recoveries really more common in the post-COVID world? A look at market history suggests otherwise and hints that a common bias might be skewing perceptions.

Investment strategies

Asset allocation in a world of riskier developed markets

Old distinctions between developed and emerging market bonds no longer hold true. At a time where true diversification matters more than ever, this has big ramifications for the way that portfolios should be constructed.

Investment strategies

Top 5 investment reads

As the July school holiday break nears, here are some investment classics to put onto your reading list. The books offer lessons in investment strategy, financial disasters, and mergers and acquisitions.

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.