Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Running out of money: Australians fret about retirement

Emma Rapaport  |  22 Oct 2018Text size  Decrease  Increase  |  
Email to Friend

Unhappy person

 Most working Australians fear they’ll run out of money in retirement—a problem which experts attribute to the fractured nature of Australia's retirement system, a new global survey has found.

Only one in five working Australians is optimistic about their future financial situation, while 38 per cent doubt their savings pool would satisfy their retirement needs, according to the Global Retirement Reality, released by the global advisory arm of asset manager State Street.

The survey involved interviews with more than 1200 people, which covered four groups: working population; approaching retirement; recently retired; and later in retirement.

Another key concern is the general ignorance Australians have about their financial situation in retirement: 35 per cent of the workforce say they were either unaware or only somewhat aware of how much they had saved. Only 43 per cent were aware of how their savings were invested. 

Q. Are you optimistic about your financial situation in retirement? % of working popuation

SSGA Survey Results

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Source: Global Retirement Reality Report 2018, Australia Snapshot, State Street Global Advisors

State Street Global Advisers head of retirements solutions, Australia, Jonathan Shead links the lack of confidence and awareness to the fractured nature of Australia's superannuation and retirement system, and the industry's relentless focus on capital amounts.  

"Complexities like the integration of the superannuation system with the aged pension and aged care services spur a lack of confidence in the system," Shead says.  

"Making that mental transition from a capital amount to an income that I'm going to be living on in retirement, is very difficult to do." 

Another source of anxiety for investors, Shead said, was the constant talk around the Age Pension, and perceptions that the eligibility rules would tighten 

"The constant messages about strains on government budgets, about the cost of various social security services, and on the need for people to be self-sufficient - that's a double-edged sword," Shead says.  

"On the one hand, it encourages people to take ownership for the adequacy of their income in retirement and it has done that, but it also sends a message that you can't count on government support in any way shape or form, and this isn't true. 

"Many Australians when they retire will be entitled to, if not a full pension, then a part pension. This tension will continue to play an important part in how Australians mentally process feel confident about retirement." 

However, there are some positives. People who are five years from retirement have a better knowledge of the system and a more a positive about the future.  

That said, more than a quarter still believe they would struggle to get close to what they need in retirement.  

To cope with the pain, working Australians expect to spend less on clothes, entertainment and technology when they retire. Many also want to use their home equity to fund retirement, with 46 per cent of working Australians expecting to downsize to a smaller home. 

Close to half of the workforce is also gearing up to work part-time in retirement, while many also plan to retire later. This mirrors ABS data which shows the proportion of people in the labour force over 65 is steadily increasing: it rose from 9.4 per cent in 2006 to 14 per cent in 2016.

Chart: Proportion of people (aged 55 and over) in the labour force by age, 2006, 2011 and 2016

ABS Chart Older Australians Working

Source: Australian Bureau of Statistics, Commonwealth of Australia 2017

However, few current retirees, the survey said, nominated part-time work as a significant source of income in retirement. Nor did the strategy of downsizing the family home using equity release products rank highly.  

"There's a sense in the workforce that people will work part-time through retirement, and in one sense that's true," Shead says.  

"If we're all living longer, people are going to expect to work longer and part-time work will play a part of that. But when we spoke to retirees, particularly recent retirees, many of them weren't working part-time. There are still some disconnects about what people think retirement is going to look like, and what it actually is." 

There were also lessons to be learned from current retirees, Shead said – chief among them: working Australians should start saving earlier for their retirement and engage with pension planning earlier.  


More from Morningstar

• Going all-in versus drip feeding your portfolio

• Top 10 articles of last week

Make better investment decisions with Morningstar Premium | Free 4-week trial


is the editorial manager for Morningstar Australia. Connect with Emma on Twitter @rap_reports. You can email Morningstar's editorial team editorialAU[at]morningstar[dot]com

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend