It seems two out of three Australians think their lifestyle will remain the same after they retire – but most will be shocked by the actual reality of living on significantly less.
The median expected income in retirement was double the minimum for a modest retirement, and around 28% higher than the recommended income for a comfortable retirement, according to a survey of 1,200 superannuation and SMSF members.
More than 25% are concerned that their post-retirement lifestyle will decline – suggesting they might be the 'realists'.
As stated in the report (PDF), "The Australian Retirement Vision Survey" from State Street Global Advisors, those in pre-retirement aged from 45 to 60 are most concerned, which indicates our fears grow the closer we get to retirement.
We suck at preparing for retirement
What it also means is that many Australians have their heads stuck in the sand in our early working years over our retirement years. Out attitude seems to be, "why worry about something so far into the future?", until we get closer and then we hit the panic button.
Four out of ten Australians aren't confident they will meet their target level of wealth for retirement, while those who have taken some action or received financial advice are much more likely to take an active role in preparing for retirement.
While the report suggests those who have received personal financial advice are more confident and more likely to meet their targets, it's also likely that these people have taken an active interest in their finances – and not necessarily because they have received financial advice.
They are also more likely to contribute extra to super, and to have set goals/objectives for their super and retirement savings.
What we should be doing
Ideally, we should be investing from an early age, spending less than we earn and regularly contributing to our savings or investments and superannuation.
But it's also important to ensure we have savings both inside and out of the superannuation system. One factor that was highlighted in the report was that many Australians are concerned about the impact of legislative change.
We also need to become better educated about retirement products such as annuities and allocated pensions, to sustain our lifestyle during retirement. Around 20% of retirees expect to withdraw their super as a lump sum once they retire – but they are also much more likely to become dependent on the aged pension later on.
Foolish takeaway
With $1 million unlikely to be enough to sustain your lifestyle in retirement, the key is to give compounding time to work its miracle on your investments and that means investing early and regularly.
