Younger workers’ high hopes for retirement

Aware Super

Australians with more time left in the workforce are expecting a better quality of life when they hang up the boots, but mustn’t overlook the need to plan, experts say.

Younger and middle-aged workers are far more likely than their older counterparts to expect a better standard of living in retirement than they have today, according to new research.

Australians with more than 20 years left in the workforce are twice as likely to expect better living standards after they finish working, the research by Aware Super has found.

The finding is based on usage of a new personalised digital advice tool by tens of thousands of the fund’s members in recent months.

Aware Super also found only a little over a quarter (27 per cent) of those one year out from retirement had a clear picture of the lifestyle they wanted, and therefore a specific amount in mind for their income needs.

Jacki Ellis, Head of Retirement at Aware Super, said it was important workers – “whether they’re two or 20 years out from retirement” – understood their circumstances so they could plan for the future more realistically.

“Having a keen understanding of your financial circumstances and those specific goals makes it easier to feel confident about achieving them,” Ms Ellis said.

This was particularly important in the prevailing economic climate, she said. With high inflation putting sustained pressure on living costs, lifestyle goals may be at risk without careful planning.

“Planning for the future in times like these isn’t just for those nearing or in retirement,” Ms Ellis said. “It’s hard to have a detailed view of life in retirement, especially if it’s in the distant future.”

Separate research commissioned by Aware Super in recent months found more than 90 per cent of Australians were concerned or strongly concerned about the cost of living.

The fund is urging Australians not to be complacent with their super while focussing on shorter-term financial issues, weathering higher mortgage rates and living costs. While super is a long-term investment, it’s crucial members don’t neglect their retirement savings at a cost to their quality of life when they reach retirement, the fund says.

Ms Ellis said the fund’s new digital advice tool was aimed at helping members plan. Almost 30,000 Aware Super members have used the tool, called My Retirement Planner, since it was launched mid year.

It provides users with a ‘retirement confidence score’ – measuring how likely it is that, when they’re in retirement, they’ll have the income they need for the lifestyle they’d like.

The tool allows users to change variables such as their expected retirement age and voluntary contributions to understand how they can influence that outcome.

Almost one third of users said they would make voluntary contributions to improve their confidence score rather than delaying retirement.

“This reinforces the importance of understating your retirement lifestyle goals and the actions needed to achieve them,” Ms Ellis said.

The research also found more than two in five Australians were not on track to meet their retirement goals. One in five expected to retire with additional assets outside of the family home and superannuation.

The median confidence score for those who have used the tool so far is 77 per cent.

Aware Super says that score is relatively strong – despite the fact many Australians aren’t confident about their financial outlook – because of the capacity for users to experiment with variable factors.

“As a result, our members come out feeling more confident because they have clear actions they can take to make genuine improvements over time,” Ms Ellis said.

The tool connects directly to individual members’ accounts to provide them with high-quality insights and projections. While it uses data such as the member’s current income and super balance to provide those insights, new members with as little as $1 in their account can also manually update these inputs to receive their retirement confidence score.

A public-access version of My Retirement Planner is in development with Aware Super anticipating launch in 2024.