Home / Retirement / Older and increasingly wealthier: The changing face of retirement

Australians are retiring much later and with more in their retirement coffers than ever before, according to the ABS, with a confluence of factors behind the trend.

The trend for Australians to retire later in life and with a larger bank balance continues, with a healthier retirement age population, government incentives and a collective fear of becoming impoverished leading to retirees delaying the end of their income generation years.

Recently released data from the Australian Bureau of Statistics that tracked statistics up to 2021 shows the average age at retirement across the country steady at 64.3 for the second consecutive year, up from 53.5 in the year 2000. The average age at retirement was down as low as 56.3 only 12 years earlier, in 2009.

The trend is largely attributable to an increasingly healthy population in light of medical advancements. Australia, in particular, saw life expectancy rise from 79.23 to 83.2 years between 2000 and 2021 according to Worldbank data. (The UK (80.9 years) and the US (77.28 years) actually saw a decrease in life expectancy from 2019 to 2020 – something that hasn’t happened in Australia, even during war years).

Legislative factors have also played a significant role in the development, with the minimum age to qualify for the age pension increasing in mid-2017 from 65 to an eventual 67, depending on their date of birth. Senior Australians also receive extra encouragement to continue working via the Work Bonus, which lets them earn up to $300 per fortnight without having that income assessed under the pension income test.

According to Wattle Partners adviser Fatuma Akalo, the Work Bonus is part of a broader policy directive designed to lessen the reliance on the Age Pension.

“The government has become increasingly concerned with the ageing population, hence the incentives to keep people working,” she tells The Inside Adviser. “The work bonus is an obvious one.”

Akalo also identifies increased flexibility in the workplace as a driving force to keep people working, and saving, for longer. “People are often more able to work more tailored hours, work from home, or otherwise work in a condition better suited to their situation and abilities,” she adds.

Underlying these factors is the collective ‘fear of running out’, which is not only pushing people to retire later but inhibiting them from spending down their retirement funds. The latter is an issue the government is trying to address, in part, with the Retirement Income Covenants mandate that APRA-regulated super fund trustees provide retirement guidance for their members.

While the ABS research only uses data up to 2021, when rates were still at all-time lows, the subsequent rate rises and attendant cost of living increases are likely to lead to even more consternation about retirement spending in future data releases, Akalo says.

“The amount you’d need to retire comfortably has shifted,” she says, “which has got a lot of people thinking they need more capital in their super.”

The ABS research revealed how effective the compulsory superannuation system, now 32 years old, has been in ensuring the vast majority of people retire with personal funds to supplement the age pension. Only 3 per cent of men retired with no personal income in 2021, down from 6 per cent in 2019. For women, the 19 per cent that retired with no personal income in 2021 is a 10 per cent decline from the 29 per cent that did so in 2019.

Several other idiosyncrasies in the Australian retirement diaspora were also uncovered, including the sectors that prefer early retirement. Those in mining, public safety and administration, financial services and insurance, and education are all most likely to look for an early retirement according to the ABS, while the agriculture, forestry and fishing industry, together with construction workers, rental and real estate workers and those working in food services industries all intend on working the longest duration.