Retirement affordability: 4 in 10 over 50s plagued by worry

With the cost of living soaring and the inflation rate hovering at around 5.1%, many older Australians are struggling to make ends meet.    

The Australian Seniors' latest Quality of Life Report 2022 has found that nearly four in 10 over fifties are worried about the affordability of retirement (36%), with two in five (41%) now accepting a future where they may have to make do with less money and not do all the things they had hoped for (54%). 

The researchers surveyed more than 5,000 Australians over 50 to explore what matters most to the seniors community, as well as their attitudes towards retirement and the future of care.

Inflation and other cost of living pressures has also meant that the majority of Australia’s pre-retirees do not feel financially prepared for retirement, with two in three (64%) pre-retirees having no firm plans for how they’ll fund retirement (64%), according to the report. 

Measuring quality of life

The research suggest that overall, older Australians have developed a well-rounded definition of quality of life beyond the pandemic, citing good physical health (87%), being financially comfortable (85%), good mental health (82%), and living independently for as long as possible (79%) as key components. 

Deputy Director of the Centre for Ageing, Cognition and Wellbeing at Macquarie University, Dr. Carly Johnco said,“Older adults have been resilient in their emotional response to the pandemic often because they tend prioritise close relationships, meaning and emotional contentment. The pandemic in many ways has forced everyone to become more aware of their mortality, with many people taking stock of their life circumstances and reprioritising the things that matter to them.” 

A reflection on what matters most in the present has also influenced expectations for the future, with as many as 1 in 3 (36%) retirees admitting that their priorities for a quality life in retirement had changed as a result of the pandemic, particularly regarding family and health, according to the report.

While possible health care needs (65%) have always been somewhat of a staple priority for older Australians when determining retirement plans, it’s evident that recent events have made financial stability and mental well-being a focus, with costs (58%), maintaining a sense of purpose (43%), and finding meaningful ways to spend time (42%) becoming common considerations, according to Australian Seniors. 

Financial pressures and affordability

Recent events have highlighted the value of living independently for as long as possible for many older Australians, with this being ranked as the highest concern (61%) among over 50s when considering future living arrangements, according to the report. Beyond this, other common anxieties towards retirement plans seem to ladder back to financial security, with general financial pressures (42%) and the affordability of retirement villages (36%) following as leading concerns.  

Reconnecting with values of family, community, and living independently over the past few years has manifested in a strong preference for home care among the vast majority (82%) of older Australians, while the pandemic, conversely, has tainted perceptions of aged care facilities for nearly half (48%). 

While the popularity of home care has risen steadily in recent years, the pandemic has brought to light some of its greatest advantages including living in a familiar location (78%), near family (51%), health care support (53%), or within an established community (46%).

Popularity of home care

On the flip side, the popularity of home care also proved to be a deterrent for more than a third (34%) of senior Australians who were discouraged by dealing with long waiting lists, the report found. Other concerns around home care include finding a suitable carer to trust (59%), being able to afford it (47%), and organising a suitable home care package (43%). 

Johnco said, “Planning for retirement and old age can confront us with thoughts about a range of negative scenarios, including how we might need to change our lifestyle in the case of physical health problems, housing, finances and social relationships.”

“It’s very normal to want to avoid situations or topics that make us feel anxious or uncomfortable, so it’s unsurprising that many Australians have delayed their retirement planning or have avoided having conversations about retirement planning with loves ones altogether. However, avoiding retirement planning doesn’t make it easier in the long run, and can result in poorer outcomes when the appropriate plans have not been put in place.” 

With as many as two in five (41%) older Australians reporting that their family has experienced some degree of anxiety or stress towards planning health and aged care needs for either themselves or a loved one, it is not surprising that this is an uncomfortable conversation for many people, said Australian Seniors in a statement.

However, it is important to recognise that older Australians require a robust support network to aid them through this life transition, with a third (35%) admitting they need more guidance organising their retirement chapter, the statement said. 

Retirement planning conversation

For families looking to start the conversation, Johnco suggested, “When tasks feel overwhelming, it’s often helpful to break them down into smaller steps. Breaking down the conversation around retirement planning into separate topics, whether it be financial, health, social or housing, can be easier than trying to tackle all the possible issues at once.”

“Perhaps you could initially mention to a family member that you would like to set up a future time to discuss retirement and care plans or ask them to help you collect some information about one area of retirement planning to get them started. Having a close friend or family member support you as you consider the information can also help to keep the planning on track and avoid the urge to give up when it gets hard.” Johnco said. 

Below are further key findings from the research: 

Financial concerns 

• Many Australians agree that the COVID-19 pandemic shifted their expectations of life, with around 2 in 5 (41%) now accepting a future where they may have to make do with less money. 
• Nearly 2 in 5 (38%) senior pre-retirees don’t feel particularly prepared or feel prepared at all financially for their retirement.  
• Despite the importance of money to support our retirement dreams, nearly 2 in 3 (63%) seniors don’t have financial plans in place or only vague ones and only 1 in 7 (14%) have documented or professional plans. 
• 3 in 10 (30%) expect to have (at best) an adequate or basic retirement living standard or are unsure, signalling they expect to have to make compromises to their quality of life.  
• Over a third of pre-retirees (39%) agree they’d feel more confidence in their retirement if they knew how much money they can afford to spend now vs. how much to save or understood how they’ll fund health and aged care costs (35%). 
• 8 in 10 seniors find home care more appealing than living in a nursing home or aged care facility, but being able to fund it is a top concern for almost half (47%). In fact, most senior Australians admit they have very little awareness about how home care packages work or how much they cost (74%) and feel they would need more support to organise home care for either themselves or a loved one (67%). 
• More than half of retirees (54%) describe their current living arrangement as modest, adequate, or basic, suggesting they’re already having to make compromises to their quality of life due to affordability.  
• Around two thirds of retirees (65%) agree that one of the key pieces of advice they can share with younger Australians in hindsight is learning how to save and spend your money wisely (65%). 

Life and retirement outlook

• Retirees find more confidence through feeling valued (42%) and finding purpose (38%) even more so than typically common health and financial goals.  
• Over 2 in 5 have changed their expectations of the quality of life they’ll achieve/be able to maintain in retirement because of the COVID-19 pandemic (44%) – typically around travel, health risks, and financial security. 
• Most (86%) older Australians suggest they would aim to remain in home care for as long as possible and a quarter (25%) are currently considering ways to extend their ability to remain in home care. 
• When asked about their biggest concerns for the future, the most common responses among retirees were dealing with health issues (65%), where the world is going (49%), welfare and happiness of their family (42%), running out of money (32%), navigating the aged care system (31%), and losing control (29%). 
• Seniors are more likely optimistic than pessimistic about the year ahead but, overall, most likely realistic. However, nearly 3 in 5 (58%) are minimally or not confident at all that life will largely return to ‘normal’ in 2022.