Priorities can change as we get older. The financial concerns that nag away in the background throughout our working lives may start to fade away, replaced by other priorities like personal health. But with more people living longer, and staying healthy well into their retirement years, a growing number are looking for new purpose in later life.
Having enough to do with their time was one of the top five answers when we asked retirees about the key drivers of life satisfaction in the latest MLC Wealth Behaviour Survey. Only their partners, relationships with other family, their homes and sense of independence rated more highly. For women, having enough to do was of even more important for life satisfaction than their homes.
For many retirees this is activism with a small ‘a’. Some might be campaigning on the frontline of global issues like climate change, or national concerns like healthcare policy, but most are more likely to be playing an active role in the local Lions club or raising funds for their grandchildren’s schools. They want to have an impact on the lives of their families, friends and the communities where they live. There’s an element of legacy in considering the world they want to leave for future generations.
There’s a fascinating paradox between older Australians being happier in their own lives but worrying about the future. Payday loans are a great example. Younger men are more likely to have these debts, but older men are most worried about them. This suggests they’re worrying about their children and grandchildren. They’re more attuned to the challenges facing young people than previous generations of parents and grandparents.
When considering life in retirement, levels of anxiety and satisfaction couldn’t be more different. MLC’s quarterly survey entitled ‘Life in Retirement Index’ shows that retired Australians have the lowest levels of anxiety (41.8 points from 100). Those over the age of 65 who are yet to retire are also much less concerned (42.0) than the average Australian (52.4) when considering life in retirement. Those in the 30-49 years age group have the highest anxiety levels about retirement (58.4).
People over the age of 65 (61.5) and those already retired (64.1) had the highest satisfaction ratings when considering life in retirement. Those aged 30-49 years were least satisfied with their retirement prospects (46.7), which is hardly surprising given that this group has the highest levels of other financial commitments like mortgages and child-related expenses. Women were significantly less satisfied and more anxious than men on average, perhaps because many have spent time out of the workforce to raise children.
In many cases, we know many of these anxieties are grounded in money. They fall away and life satisfaction climbs significantly as priorities shift in later life. We come to value our families, homes, independence, time, friendships and pets more than dollars.
Our perceptions of financial adequacy can also change. People may need less than they think and the reality of life in retirement is far more positive than many people expect. We might call this busting the ‘million-dollar myth’. The Wealth Behaviour Survey shows retirees believe they need $631,000 on average to fund their retirement lifestyle, which is about $400,000 less than those still in the workforce think they’ll require.
The average Australian has enough equity in their home to cover this shortfall but only 13 per cent of pre-retirees plan to sell and only six per cent of retired people have done so. Only three per cent have used equity in their home to fund retirement. These results are in line with MLC’s Wealth Behaviour Survey conducted in the last quarter of 2017 which found that most Australians don’t want to move or sell when they retire, and most retirees haven’t moved. This suggests most Australians like where they live and their homes are an important part of that. It also means they may need to rely on other income and savings in retirement.
The retirement smile
One of the reasons people need less than they think during retirement is known as the retirement smile. Put forward by David Blanchett in the Journal of Financial Planning five years ago, his modelling shows that average retiree spending falls gradually each year after the age of 65 before starting to increase again after the age of 85 due to medical expenses.
Australians point to the high cost of living (17 per cent) as the biggest single concern about life in retirement. This is true of all age groups except the over 65s, where personal health becomes the most important issue. Where non-retired Australians are more likely to worry about not having enough savings, people in retirement are more concerned about health, pensions and benefits, government policy or low interest rates.
At the risk of putting some tension into relationship dynamics in homes across Australia, the latest Wealth Behaviour Survey also shows that retired women are more likely to miss their pet than their partner. That’s awkward.
Although there’s much more to retirement than wealth, financial concerns shape our view of the future. Whatever your personal circumstances, addressing your worries now will give you more capacity to find your purpose and enjoy later life.
This article was originally published in The Australian.
This information does not take into account your personal financial situation or needs. You should consider whether it is appropriate for your circumstances prior to making any investment decision.
 Blanchett, David. 2014. “Exploring the Retirement Consumption Puzzle.” Journal of Financial Planning 27 (5): 34–42.