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Australians expect $200K retirement savings gap as FORO concerns grow

Higher rates and the cost of living, on top of global events, have contributed to increased Fear Of Running Out across the country. Yet the level of concern may be relatively unfounded, AMP reports.

More Australians are worried they won’t have enough to live on, with three in five believing they’ll fall short – up from only two in five people two years ago – according to research from institutional wealth provider AMP.

The recent Financial Wellness report from AMP reveals a “staggering” $200,000 gap between what people think they need to retire comfortably ($600,000) and what they believe they’ll have ($400,000).

Despite the Fear of Running Out (FORO) growing, however, AMP says the actual likelihood of running out may not match the level of concern.

  • “Whilst FORO is real and understandable it’s also striking that authoritative sources like Treasury’s Retirement Income Review (RIR) suggest that many retirees comfortably outlive their savings,” the report notes. “So this stress may be overdone – and unnecessary.”

    Much of the concern, AMP explains, is due to topical events such a rising inflation and the higher cost of living, on top of the lingering effect of the pandemic and the war on Ukraine.

    “Over one third (35 per cent) of workers had to change their retirement goals thanks to the impact of the pandemic and the policy responses to it (lockdowns, JobKeeper etc),” the report states.

    “But it’s quite striking that it’s more recent economic trends – higher costs and rising inflation – now dominating people’s thinking about retirement, especially those who may not have had the opportunity to build their retirement savings over a long period.”

    Stoking fears

    The number of people who expect a comfortable retirement has now dropped ten per cent. Twenty one per cent of surveyed employees are “not at all confident” they will be able to achieve the standard of living they want in retirement according to the report.

    “AMP’s research is conclusive,” it states. “The past two years have increased people’s fears that retirement won’t live up to their expectations and that their non-work lives will be crimped by financial concerns.”

    Over 60 per vent of people now say they’d be willing to work for longer to avoid a lifestyle downgrade during retirement, AMP reports. Much fewer (34 per cent) would be willing to re-adjust their lifestyle expectations.

    The retirement concerns of women are increasingly outstripping those of men, AMP adds. Forty-five per cent of women are “particularly” worried about higher costs affecting their retirement lifestyle, a “significant” increase on 2020. “Similarly it is women, single parents and pre-retirees who are more concerned about the damage inflation could do to their life after work,” the report continues.

    Silver linings

    Despite the growing levels of concern, AMP believes there are positives to come out of the findings.

    “The fact that Australians are engaging more actively with their super planning and are prepared to be flexible about reaching their goals is a highly positive development,” the report states, noting that everyone from policymakers to financial advisers should invest in retirement income education that “covers the whole board” by giving people a realistic view of their retirement prospects.

    “Educate employees about the broader range of tools that can help them fund their retirement – the age pension, government benefits such as discount cards, low-cost healthcare through Medicare, property ownership and part-time work,” it advises.

    “Similarly, help people to ‘right-size’ their retirement goals – to take into account their income, health, family circumstances, work patterns and lifestyle expectations in ways that encourage positive action rather than worry and anxiety.”

    Tahn Sharpe

    Tahn is managing editor across The Inside Network's three publications.

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