Australians lacking financial literacy around retirement: TAL

In its white paper, What I Wish I Knew About Retirement, TAL explored older Australians’ views and experiences regarding retirement, gaining insight on how advisers and super funds can help better educate Australians about retirement.

TAL’s retirement lived experience research study, conducted by research partner Edentify in August 2023, surveyed 442 retirees and 558 retirees aged 55 years or older.

What TAL noted as one of the more “positive” insights was that many of those who are retired or approaching retirement have, in some form, made an intentional effort to improve their financial literacy to understand how to best manage their retirement funds.

Looking at where pre-retirees go for information about super and investments, the study found that more than half (51 per cent) had engaged with their super fund, 42 per cent went to a financial adviser, and 31 per cent looked online for information.

Similarly, retirees relied heavily on a financial adviser (45 per cent), their super fund (37 per cent), and online resources (19 per cent) for information.

While both groups accessed a number of resources to improve their financial literacy around retirement, some of which have not been mentioned, 11 per cent of respondents from both groups reported they had not accessed any sources of information.

Speaking on the findings, TAL general manager of growth, retirement and wealth partnerships Ashton Jones said super funds can play a key role in educating people about retirement, improving their understanding of relevant products, and steps to prepare for retirement.

“Our research shows that while three-quarters of pre-retirees are engaged or highly engaged with their finances, one in three don’t know what they will do with their super when they retire. Super funds can play a pivotal role in helping these members attain the retirement lifestyle they want and deserve,” Jones said.

Unsure how much they need to retire

Notably, the study showed that 30 per cent of respondents had over $500,000 in their super upon retirement, however almost one in five (18 per cent) had less than $150,000.

TAL said this could be cause for serious concern, particularly as the Association of Super Funds of Australia (ASFA) Retirement Standard recommends $595,000 for singles and $690,000 for a couple with a retirement age of 67.

One respondent said: “I should have had more in superannuation and I should have also had a financial planner”, while others shared sentiments stating they wished they had put more into super while they were working and that they didn’t realise how much they would need to retire.

While many respondents said they took steps to prepare for their retirement, such as topping up their super (33 per cent), working reduced hours prior to retirement (20 per cent), and contributing more to their savings and investments, 39 per cent said they hadn’t taken any of the common actions to prepare.

“A lack of preparation may lead to unexpected outcomes in retirement, with around one in five retirees (22 per cent) saying their retirement finances are now worse than they’d anticipated. Unfortunately, many retirees only realised the true value of super after they’d already left the workforce,” the report said.

Highlighting the need to start preparing for retirement earlier, the study revealed that 11 per cent of respondents found themselves retiring earlier than they expected due to redundancy, illness or unemployment, and one-third of retirees now expect to live longer than they anticipated when they initially retired. TAL noted that both situations could lead to financial difficulties later in life.

“With 2.5 million Australians approaching retirement in the next decade, it is essential that we do everything to ensure they are well equipped for the realities of life after work,” Jones said.

The whitepaper also found that while many expect to retire between the ages of 65 and 69, six in 10 retire before this age in reality.

“When retirement arrives sooner than expected, it can derail a person’s ability to prepare as much as they’d like to. Some common themes that emerged for retirees were that many wish they’d put more into superannuation when they had the chance, or that they’d started salary sacrificing earlier,” Jones added.

This was coupled with one-third of retirees now expecting to live longer than they originally anticipated when they first retired, despite declining physical health.