Sydney, 7 November 2013: Only 19% of Baby Boomers say recent moves to increase super contributions will give them more confidence in their ability to fund their retirement dreams according to the 2013 RaboDirect National Savings and Debt Barometer (NSDB), launched today.
The survey of 2,322 Australians aged 18 to 65 also revealed the extent of the gap between average current superannuation pot ($180,467) for Baby Boomers and what they anticipate they will have at retirement ($316,666). And this latter figure falls worryingly short of the amount people feel that they would need to live 20 years in retirement ($749,824).
RaboDirect’s General Manager Greg McAweeney commented, “The retirement shortfall is worsened by the fact that, generally, people aren’t planning for the improvement in life expectancy. For instance people who are now 65 are expected to live until 85 for a man and 87 years for a woman and this equates to 20 years in retirement. And if you are younger than 65 you will live even longer than 20 years in retirement.”
The NSDB also found that almost one third (29%) of the Baby Boomer generation expect to have a mortgage when they retire. A large proportion are banking on super to repay this debt (25%) and for a further 33%, downsizing will hold the key to clearing their current mortgage and allowing them to enjoy their retirement mortgage free.
Levels of concern around mortgage debt post retirement are also high according to the study – more than half of Baby Boomers (54%) report that they are ‘quite’ or ‘very’ concerned about the prospect of retiring with a home loan.
While these findings may paint a seemingly bleak picture for retirees, Mr McAweeney says that awareness is necessary to encourage action and for people to think about how best to address the problems they are facing.
“It’s only with planning ahead, and having a clear understanding of their financial position heading into pre-retirement and retirement, that people can then start to think about solutions. Those who are a number of years away from retirement still have time to consider alternative savings strategies so they can avoid selling their homes or dipping into their super unnecessarily,” he said.
In other findings from the study released today, close to half of Baby Boomers (48%) expect to run out of money during retirement and say they will need the Aged Pension.
“For those who are facing the probability of drawing an Aged Pension later in life it is particularly important to look at ways of making their savings work as hard as possible now and really preparing for their retirement date,” Mr McAweeney commented.
Key findings from the RaboDirect National Savings and Debt Barometer
- The good news: Baby Boomers will live, on average, longer than they anticipate.
- The bad news: They will need significantly more money than what they expect and changes to super contributions offer little hope
- And the questionable: Many Baby Boomers will be banking on downsizing the family home to fund retirement dreams. Or at least pay the mortgage off.
- The study found that many Baby Boomers are already living on a tight budget. More than seven in 10 (72%) Baby Boomers are reducing their power usage to save money and 68% are doing their own odd jobs rather than employing a tradesman.
- Despite high levels of concern amongst Baby Boomer mortgagees, a significant proportion does not know what the rate is on their mortgage (16%).
- In the current study 48% of Baby Boomers said they expected to run out of money during retirement. This is down from 57% last year, indicating an increase in confidence for this group.
Mr McAweeney concluded, “We conduct the National Savings and Debt Barometer to encourage people to become more engaged with their money so they can plan ahead and make the most of what they’ve got. For example, we know that Aussies are losing out on billions of lost interest by leaving their money in low interest accounts – the survey this year found that the average balance sitting in Australians’ transaction accounts has increased by 42.9% (from $1,396 to $1,995). By moving some of this excess money from a transaction account into a true-to-label savings account, Australians can make their money work harder for them and can truly experience the benefits of compound interest. This will give people greater financial freedom and more options in retirement.”
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