Shocking news from a recent study by the Melbourne Intitute among people approaching retirement finds that Australians are generally not saving enough to maintain a living standard they believe is satisfactory for their entire expected life after retirement.
For example, the projected life expectancy at retirement for a 55-59 year old single male is 17.2 years, yet calculations show that median projected savings at retirement would support the acceptable income of the median member of this group for only five years. For single women in this age range, the situation is even more dire, with median projected savings supporting only 2 years of the expected 20.7 years to be spent in retirement.
Partnered men and women are better prepared for retirement, but the median member of most of the groups is still projected to have insufficient savings. For example, the median partnered man aged 50-54 has a projected savings shortfall of over 4 years and the median partnered woman aged 50-54 has a projected savings shortfall of over 10 years. The greater shortfall for women is mostly because they have greater life expectancy in retirement.
HILDA, the Household, Income and Labour Dynamics in Australia survey, is a nationally representative household longitudinal survey and can be downloaded here.
The study examined the adequacy of retirement savings of the ‘typical’ (median) member of various groups of people by estimating the gap between the number of years projected retirement savings at retirement would support their minimum acceptable living standard and the number of years they were projected to live after retirement. While the median member of most groups was found to have inadequate savings, the gap was particularly large for single people, especially those aged above 55.
Just five years of retirement savings? No wonder there’s a push to encourage people to work longer! As if they should even need to be told.