As super balances grow and retirement draws closer, you’d expect Australians to become steadily more confident about life after work. They don’t.
AMP’s latest Retirement Confidence Pulse shows for those in their 20s and 30s confidence starts at 50 per cent and rises to 60 per cent. It then falls 20 points to just 40 per cent for those Australians in the 40s.
Among those aged 50 to 64, it then recovers only slightly to 47 per cent, before rising to 61 per cent after 65.
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The numbers point to a blind spot in a retirement system built around the steady accumulation of savings. People’s lives are far from linear. A mortgage, children, caring responsibilities, career interruptions and the daily cost of living can arrive at once. The 40s are often when long-term financial intentions collide with immediate, and often significant, financial demands.
Seven in 10 Australians in their 40s worry they will run out of money in retirement – the highest of any age group. Across the broader population, three-quarters say inflation and higher living costs have increased their concerns. Almost half nominate the cost of living as the greatest threat to their retirement, compared with only 13 per cent who point to insufficient super.
People do not separate retirement from the rest of their financial lives, however, our industry and our policy settings too often do.
The lesson from these findings is pretty clear: we are starting the serious retirement conversation too late.
In your 20s, retirement is understandably distant. The challenge is not to make a 25-year-old an expert in retirement-income policy, but to give them a line of sight between the money going into super and the life it may support later.
Confidence is highest in the 30s, but that should not be mistaken for preparedness. This is the time for members to be engaged so they understand the benefits of additional contributions on compounding – not just getting another annual statement most will never read.
The 20-point fall in confidence that comes when people hit their 40s should concern every super fund. Members need a proper midlife check-in: what they have, what it may provide, how their home and debt fit into the picture, and what practical actions remain open to them.
A generic calculator is not enough, and nor is a call centre that can explain an account but not help with the fear behind the question the member is really asking: “Am I going to be okay?”
This is why the Government’s advice reforms are important. We need strong protections against poor advice and predatory behaviour. We also need a clear and workable path for funds to provide safe, targeted advice at scale and, critically, an easy progression to a fully qualified financial adviser when a member’s circumstances become more complex.
The problem is pretty clear: we are starting the serious retirement conversation too late. · Supplied
We know that not enough people access financial advice. But our research shows that of those who do get advice 69 per cent have retirement confidence, compared with just 41 per cent among those without it. That does not prove advice alone creates confidence, but the size of the gap cannot be dismissed.
For those aged 50 to 64, the window for making meaningful adjustments is narrowing and confidence remains below half. This is where people need a view of their likely income, debt, housing, partner’s circumstances and possible Age Pension entitlement. Retirement advice has to reflect the household people actually live in.
When Australians reach retirement they need flexibility, and also greater certainty. That means much clearer guidance and genuine choice across account-based pensions, lifetime income solutions and the Age Pension, supported by advice that explains the trade-offs in simple terms.
Government should create the conditions for those choices, but the responsibility to make the choices easy to understand and accessible sits squarely with the industry. This means not beginning conversations with our members about their retirement on their last day at work.
Compulsory super made saving for retirement automatic. Our next challenge is to make timely help just as dependable: a line of sight early in working life, a proper check-in through middle age, advice before retirement and genuine income choices when work ends.
The confidence drop in the 40s tells us where we are losing people. We cannot wait another 20 years to help them find their way back.
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