Confidence in retirement comes from planning

A new study conducted by Vanguard has found Australians with the most confidence in their retirement have undergone “purposeful action to prepare”, confirming retirement confidence is not always dependent on age or income.

The How Australia Retires study revealed 52 per cent of respondents felt “highly confident about their retirement readiness”, are “optimistic about the [retirement] phase of their life” and are more likely to use budgets (35 per cent) and prioritise savings (45 per cent).

Those who said they were not as confident in their preparation for retirement do not “tend to make regular additional super contributions, are generally less optimistic and are more likely to feel disinterested, anxious or worried about this later phase of life”. Just under one-quarter of those who feel less confident said they prioritise savings, 14 per cent said they set clear budgets and only 25 per cent said they have a good idea of how to get the desired retirement.

Of the older Australians who participated in the survey and had taken less than typical action to prepare for retirement, only 27 per cent said they feel optimistic about retirement and 23 per cent feel very confident. The main concerns cited were not having enough income in retirement and not knowing the right actions to achieve the desired retirement.

“One of the key findings in this report is that having a plan is one of the most effective ways to not only achieve a successful retirement, but to alleviate the emotional burdens and anxieties that Australians can feel towards retiring,” Daniel Shrimski, Vanguard Australia’s Managing Director, said.

“For younger Australians in particular who are redefining the traditional path towards retirement with career breaks, parental leave and travel, having a plan is paramount to ensuring these pauses in paid work don’t impede their ability to accumulate enough superannuation and save for retirement.

“The study also provides evidence that Australians display low engagement and understanding when it comes to superannuation, with half not knowing how much they pay in annual fees, and 1 in 4 not knowing what their current superannuation balance is.

“An opportunity, and perhaps a need, therefore exists for the superannuation industry on the whole to improve member engagement, to simplify fee structures, and to support stronger retirement outcomes.”

The survey also found a lack of engagement of members with super funds and financial advisers to assist in preparing for retirement. One-quarter of working-age respondents said they did not know their current super balance, while 50 per cent are unsure how much they pay in super fees. Close to two-thirds of working-age participants also said they had never spoken to a financial adviser to “map out their retirement strategy”, of which 75 per cent said they did not feel confident in being able to fund their retirement.