AN ALARMINGLY high number of baby-boomers underestimate how much money they will need to retire in comfort, research has revealed.
Industry super fund REST conducted a survey of more than 1200 Australian over the age of 50 who were still in the workforce.
The survey, the results of which are contained in the white paper The Journey Begins, found just 14% of Australian baby-boomers - those people born between 1946 and 1954 - said they were financially prepared for retirement.
A further 51% said they were partially prepared, while 35% indicated they were completely unprepared.
REST CEO Damian Hill said it was a case of champagne taste and beer money for a worryingly higher number of baby-boomers.
The research found that despite high expectations about what retirement would bring, there was a distinctly low level of understanding among baby-boomers about how much they would require each year to fund a comfortable retirement lifestyle.
On average, the amount nominated by respondents required for a comfortable retirement was well below the $56,236 "comfortable lifestyle" budget for a couple and $41,090 budget for single people, as estimated by the Association of Superannuation Funds of Australia.
In fact 49% of singles and 61% of couples underestimated how much they would need to fund a "comfortable lifestyle".
Despite this, almost half of respondents believed they would not need to give anything up in retirement due to financial constraints.
"What we found is some sizeable gaps between what baby-boomers are envisaging for their retirement and what the reality will be," Mr Hill said.
"In order to avoid disappointment for many, the financial services sector will need to work with government to educate and encourage people to plan and prepare far earlier."
Mr Hill said the survey also revealed baby-boomers were reluctant to seek help in planning their retirements, with 70% admitting to not having sought formal financial advice.
A quarter of the respondents said they were "just closing their eyes and hoping for the best" as retirement approached.
"The research shows that baby-boomers are largely unprepared for retirement, with most people leaving it very late to start the planning process. One third of respondents believe they are completely unprepared financially for retirement," Mr Hill said.
"While some see no need or handle their own affairs, many actually consider financial advice to be too expensive or not trustworthy."
Superannuation was nominated as the most common source of retirement income for a majority of those surveyed.
But despite this less than half the people approaching retirement had a good grasp of how much they had saved in super or took an active interest in trying to grow this balance.
OTHER KEY FINDINGS
- Many intend to ease into retirement through part-time work.
- One in three of unretired over 50s have financial dependants whose needs will have to be taken into account when deciding when or whether to retire.
- Almost half of respondents over 65 said they would have preferred to be retired already, indicating that the GFC and financial market underperformance may have forced some to delay their retirement plans.
- Almost half of respondents are planning on moving house once they retire, with more than a quarter planning on downsizing.
- Internet/mobile phone, domestic holidays, international holidays, dining out and health insurance were the top five items that people were not prepared to give up in retirement.