Retirement.
The calm after the storm


The journey to retirement is full of unknowns. About health. About how long you'll live. About expenses and how long savings will last. Such unknowns may introduce worry into the prospect of retirement.

In a four-country survey, pre-retirees consistently expressed anxiety about their life in retirement.* Retirees? They'd change some things, but on balance they're satisfied.

*The survey of pre-retirees and recent retirees was conducted among more than 5,000 households in Australia, the United Kingdom, the United States and Canada.

 

Financial satisfaction


Recent retirees tend to feel more satisfied with their financial situation compared with pre-retirees’ expectations about their finances in retirement.

Through being forced to make decisions about their transition to retirement, retirees may have simply resolved the uncertainty that came with it and adjusted to their new reality.

Pre-retiree

25% High satisfaction 29% Medium satisfaction 46% Low satisfaction
 

Recent retiree

15% High satisfaction 19% Medium satisfaction 65% Low satisfaction
 

Low satisfaction Medium satisfaction High satisfaction

 

Freedom to spend


Despite having assets similar to those of recent retirees, pre-retirees are more likely to expect to feel constrained in their spending in retirement.

Recent retirees describe their household budget situation more favourably.

13% 61% 26%

Pre-retiree

23% 62% 15%

Recent retiree

Can spend freely, within reason
Can cover needs, some discretionary spending
Household in strict budget

 

Financial confidence


Recent retirees' more positive financial outlook is evident in their confidence in their financial decisions and how they view the complexity of their decision-making.

47%

33%

The financial decisions I face today are complex

38%

29%

I feel uncertain about the outlook of my financial situation

57%

74%

I am confident in the financial decisions I am making for retirement

Pre-retiree Recent retiree

 

Varied income sources


Recent retirees draw income from varied sources that are largely in line with pre-retirees' expected income sources. Retirees supplement government and work-related pensions with personal savings and other tax-advantaged accounts. Some even tap into home equity.

 

Pre-retiree

Recent retiree

Government pensions

income sources

53%
50%

Personal savings and tax-advantaged accounts

income sources

75%
75%

Defined-contribution schemes

income sources

83%
64%

Self-managed superannuation funds

income sources

13%
13%

Salary/Wages

income sources

37%
10%

Home equity

income sources

46%
47%

Pre-retiree Recent retiree

 

Work as a fallback


While nearly half of pre-retirees expect to work some in retirement, far fewer retirees actually do. While some may find they don't need to work, others may find they can't – for health or other reasons. The upshot: Planning to work in retirement may not be an option for everyone who is counting on it.

42%

Pre-retirees who expect to work in retirement

11%

Recent retirees who work at least once a week

Pre-retiree Recent retiree

 

Retirement planning


Some pre-retirees and recent retirees have undertaken retirement transition planning, such as figuring out how much money they'll need. Fewer have planned for how to access and/or manage their investments in retirement. And some haven't planned at all.

(Percentage completing these planning activities.)

 

Pre-retiree

Recent retiree

Amount of money I need to retire

planning

53%
60%

Amount of monthly retirement income needed

planning

50%
58%

How I will generate retirement income

planning

46%
49%

How I will manage taxes

planning

27%
28%

Did not plan/Have not planned

planning

13%
10%

Pre-retiree Recent retiree

 

The retirement income challenge


For the most part, retirees and pre-retirees trust their own judgement in deciding when to retire or whether to work in retirement. They're also comfortable handling specific financial planning matters, such as managing home equity. But they find the task of drawing income from investments or managing investments in retirement more challenging.

(Percentage citing "myself" as the best source of help.)

Whether to work in retirement

income

80%

When to retire

income

76%

How to manage my home/home equity

income

60%

How to manage administration of a self-managed superannuation fund

income

37%

How to manage investments in retirement

income

31%

How to draw down from a defined-contribution scheme

income

27%

 

Financial advice


While a majority of retirees and pre-retirees have sought help from professional financial advisers or other "formal" advice sources, such as a workplace retirement programme or financial institution, a small group has had help only from government or informal advice sources. And a sizeable minority has gone without advice of any kind.

39% 28% 3% 8% 22%

Pre-retiree

41% 33% 4% 6% 16%

Recent retiree

Formal help, multiple sources
Formal help: single source
Government only
Informal help only
No help

 

The advice choice


Why didn't individuals make use of specific advice sources? For most sources, a common answer was they simply used a different source of advice.

However, some said they weren't aware the advice source existed, or they didn't believe it was useful or trustworthy. Others lacked access to the advice source. Cost was an issue too, particularly for those who chose not to use financial advisers.

Financial adviser

 

Pre-retiree

Recent retiree

Too expensive

planning

68%
63%

Not trustworthy

planning

41%
38%

Not useful

planning

19%
19%

Unaware support offered

planning

10%
10%

Unable to access or use

planning

04%
04%

Have other sources of support

planning

33%
50%

Pre-retiree Recent retiree

 

The advice choice


Employer scheme

 

Pre-retiree

Recent retiree

Too expensive

planning

13%
14%

Not trustworthy

planning

11%
09%

Not useful

planning

10%
13%

Unaware support offered

planning

16%
15%

Unable to access or use

planning

05%
06%

Have other sources of support

planning

38%
46%

Pre-retiree Recent retiree

 

The advice choice


Financial institution

 

Pre-retiree

Recent retiree

Too expensive

planning

21%
19%

Not trustworthy

planning

31%
26%

Not useful

planning

13%
15%

Unaware support offered

planning

13%
11%

Unable to access or use

planning

01%
02%

Have other sources of support

planning

36%
46%

Pre-retiree Recent retiree

 

The advice choice


Government

 

Pre-retiree

Recent retiree

Too expensive

planning

03%
02%

Not trustworthy

planning

09%
07%

Not useful

planning

14%
16%

Unaware support offered

planning

35%
29%

Unable to access or use

planning

05%
08%

Have other sources of support

planning

32%
47%

Pre-retiree Recent retiree

 

A question of trust


To varying degrees, trust played a role in the decision to avoid certain sources of advice. Globally, this was most pronounced for views of financial advisers and, to a lesser extent, financial institutions and government. However, among those who use these advice sources, ratings for their trustworthiness tend to be high.

(Percentage saying they didn't believe the source would be trustworthy.)

Financial adviser

Employer scheme

Financial institution

Government

Pre-retiree Recent retiree

 

Online engagement with workplace retirement programmes


For workplace retirement scheme members, a shift towards online advice is under way. While recent retirees are more likely to access advice by attending a seminar, pre-retirees are more likely to visit their retirement scheme websites.

57%

48%

Visited website

29%

44%

Visited office in person

37%

48%

Attended a seminar in person

Pre-retiree Recent retiree

 

In-person engagement with financial institutions


The online advice shift hasn't taken hold for banks and other financial institutions, which recent retirees and pre-retirees prefer to visit in person. Increasing awareness of advice websites from these institutions would help deliver advice to a broader audience.

37%

35%

Visited website

67%

78%

Visited office in person

Pre-retiree Recent retiree

 

Retiree lookback


Having gone through their transition to retirement, what would retirees do differently? The most common answer was to save more.

I should have saved more

I should have started planning earlier

I should have learned more about my employer-sponsored superannuation fund

 

Implications of our study


Planning well in advance of retirement could help alleviate the anxiety that individuals can feel leading up to the event. Filling an "advice gap" around retirement income could be particularly valuable. Employer-sponsored superannuation funds are in a position to address this gap through scalable online advice. Similar tools can help financial advisers improve the quality and reach of their advice.

Additionally, superannuation funds could better support investors by designating simple income strategies as defaults to simplify retirement income planning, even amid the proposed introduction of Comprehensive Income Products for Retirement. Tools such as personalised retirement income projections can help inform retirement income needs and drawdown strategies.

Important information


ORC International surveyed 5,663 households, including 1,546 in Australia, on behalf of The Vanguard Group, Inc., and Vanguard Investments Australia Ltd. Interviews were conducted in October and November 2015. These survey findings may not be representative of the overall population. All survey information is correct as of the date indicated. If surveyed again, respondents may answer differently. Vanguard Investments Australia Ltd. has not taken any additional steps to update or verify survey information.